September 28, 2017 | Fall Market
So far, 2017 has proven to be like no other year in Toronto real estate. Heads spun. Naysayers neighed. Predictability appeared to have been thrown out the window. Toronto real estate in 2017 has defied expectations, taken huge plot twists, and turned some of our pre-conceived notions of how things work and what properties are valuable on their head. I think very few could have guessed just how this year was going to unfold. Now that October is around the corner, many are now asking the Toronto real estate market: Is the free fall over?
Before we dig into what the Autumn of 2017 seems to be telling us about the Toronto real estate market now, let’s review the year so far:
- WINTER 2017 (January to end of March) The year definitely started off with a bang as we saw the run-up in prices starting in the Fall of 2016. By the start of 2017, though, the increases in prices were much larger than we have ever seen for a very long time. February had over 30% increases year over year in Toronto and outside Toronto in areas like Barrie, Guelph, and Oshawa. When Vancouver added a foreign buyer tax in the Fall of 2016, the Toronto market shifted substantially. It could not be ignored that there was a surge of interest in Toronto that did not have a foreign buyer tax at this time. Bidding wars, bully offers, eye-popping prices were the name of the game for many properties but particularly in the luxury market over $2,000,000. Toronto always had foreign buyers, but this time we were adding those buyer who didn’t want to pay the Vancouver foreign buyer tax to the Toronto pool of buyers.
- SPRING 2017 (April to end of June) April is when the Ontario government launched its foreign buyer tax in the Greater Toronto area and beyond. It launched some other changes as well around rent control and leasing. It was the foreign buyer tax, or even the idea of a foreign buyer tax, that put a freeze on rising prices. As sellers rushed to get their homes on the market for the winter 2017 prices, buyers, by and large, stepped to the sidelines to see what impact the foreign buyer tax would do. They also just witnessed three months of runaway prices, and were beginning to get uneasy. We saw a flood of listings with no buyers. So, during this time, prices fell. Areas with higher foreign investment like North York may have suffered more along with the luxury market. Oddly, the entry level market for condos stayed fairly competitive in downtown Toronto. Where detached houses usually had the best increases, the opposite was true. Tiny condos had the best price appreciation and resistsance to falling prices at this time. I saw condos under 500 sq ft increase in price during this time. It was only a few years ago that this kind of condo would be hard to sell.
- SUMMER (July to end of August) Summer is a traditionally slower month. By and large most average real estate prices fall between June and August because fewer houses are being sold, and the ones left from over from the Spring tend to sell for less. With that said, I find that real bottom of the falling prices may have bottomed out around July in Toronto. If you bought around then, you may have done a smart thing. Prices probably went down the most for luxury properties over two million and for properties in the “Greater” part of Greater Toronto like Richmond Hill, Whitby or Brampton. What did happen during this time, that I find interesting, has nothing to do with Toronto. Montreal prices started to rise substantially. Why? Because many foreign buyers natural gravitated to where they would not have to pay a foreign buyer tax. Vancouver had one. Toronto now had one. And Montreal. Well, nothing yet.. August was a curious month. Much of the listings in the Spring were taken off the market or sold. Overall, there were far fewer listing in August than the three previous months. Also, there was not a lot of listings coming out, but the ones that came out in desirable and central neighbourhoods started to show decent sold prices.
- FALL ( September and still happening) I have said in many of my past blogs that the Fall would likely be the time where the buyers would come back from the sidelines. The big question was: Would the sellers come back in large numbers? If they did, they would create a lot of inventory. But so far in Toronto, they are not. So, prices seem to be competitive again in many downtown Toronto neighbourhoods. Only a few days ago, I had a listing in Leslieville that received a substantive bully offer. I had booked 30 viewings in 3 days. Not bad. I can safely say that there were very few, if any, bully offers or prices way over asking in Leslievillle or any other Toronto established or emerging neighbourhood from April to August. I think my sellers were concerned that the freeze and price dip of Toronto’s real estate market, that had captivated headlines for the past several months, would continue. I suspected we would follow Vancouver and recover from a foreign buyer tax in about six months, though I think we be coming back a bit sooner around five months. Also, it should be clear that the market is not full of new listings. We are seeing fewer new properties or sale this Fall, though some of the properties that failed to sell in the Spring are back, mostly with the price they didn’t get in the Spring. We are certainly nowhere near the fervor that had taken over in the winter, but I think many established and emerging neighbourhoods in Toronto are bouncing back stronger than some expected. Not crazy. Not concerning. But not falling. The municipalities outside of Toronto may have a slower time turning around.
I expect the rest of Autumn, the Toronto market will continue to do well, though further increases in interest rates and further government intervention could damper prices again, for better or for worst. If interest rates go up again, buyers will have to make their money stretch further. New government rules yet to come may include a stress test for all mortgages, not just ones that require mortgage insurance. That will could also make it tougher for buyers. Ah 2017… it’s been a roller coaster ride that no one really could have anticipated. I don’t think we’ll have a year with as many plot twists and sharp pivots as we have seen this year for a long time. But boring may be good for those who are looking for a real estate market that is easier on the nerves. And I think we may be heading into boring territory.