Toronto Real Estate Board released the sales numbers for May 2017 as reported thru the Board’s MLS system. The new sales figures paint an interesting picture as it fairly clearly shows changes in the real estate market.
Let’s look at some of the numbers. There were 10,196 sales reported in May 2017. Comparing those numbers with 12,790 sales reported in May 2016 and it is clear that there is a slowdown in properties sold. That is a 20.3 per cent drop in sales, which is fairly substantial.
How are slowing sales affecting prices?
The average selling price (all home types) was up May 2016 to May 2017 by a strong 14.9 per cent. I need to mention here that even though prices increased substantially, the pace of price growth has slowed from the peak seen in early 2017. It also needs to be noted that the condominium market saw the largest price increases. As per figures released by TREB, average sale price is $863,910.
Listing numbers increase.
Listing inventory is up from the lows of early 2017 and up a whopping 42.9 per cent from the lows of 2016. Most of the increase in homes available for sale are in the low-rise type (detached, semi, townhomes). Condominium inventory is a little more constrained, which would explain the price increases being stronger on the condominium side of the market. Having said all that, number of homes available for sale are still low as the inventory would last less than 2 months at current sales levels.
What’s driving these market changes?
One of the forces affecting the market is the Ontario Fair Housing Plan that was recently announced by the Ontario government. I feel that the changes have brought out a negative reaction from both Buyers and Sellers. Changes, or uncertainty, often lead to overreaction and that would explain increase of listings as home owners and investors may be considering cashing out some profits, while on the other side, Buyers are more cautious in jumping in due to the uncertainty and potentially hoping that larger inventories will in fact soften the prices. Some of these factors are already in play but it is hard to predict if this is a new market trend, or an overreaction as it happened in Vancouver. Foreign Buyer Tax was brought in by the BC government and there was a swift reaction from the market. Drastic drop in sales numbers followed by recovery of the market. Will history repeat itself in Toronto?