Toronto Market Continues To Adjust

The increase in inventory levels that began in April, pursuant to the Ontario government’s announcement of it’s 16 point “Fair Housing Plan” aimed at taming Toronto’s runaway price bubble, has continued in June. We now have 2 1/2 months’ supply of homes for sale, as compared with about 1/2 month’s supply in March. This approximate quadrupling of inventory has resulted in a market that is closer to being balanced than we have seen in a long time, though it is still strong and still more of a sellers’ market than a buyers’ market. It’s just not as totally crazy as it was in the early spring.

Inventory_June_2017

Not surprisingly, the rapid increase in inventory has had the effect of bringing prices down from the stratosopheric levels reached in March and April. Prices are now about 6% higher than they were at this time last year, down from more than 30% higher at the end of March. Almost all of the gains since January have been given back.

Prices_June_2017

An interesting and somewhat surprising element of this change is the contrast between freehold and condominium properties. For several years, it was said repeatedly that the condo market was oversupplied, that too many new condos were being built, and that condo prices were due to fall, while prices for freehold properties would continue to rise due to limited supply. However, it seems that exactly the reverse has happened. Detached prices are actually lower than they were in January, while condo apartment prices have fallen very little and are still more than 20% above last year. Go figure.

Prices_Detached_June_2017

Prices_Condos_June_2017

The real question now is whether this is just a temporary pullback that will be followed by a Vancouver-style recovery; or whether this is the start of a more significant downtrend. It may be several months before we know the answer to that question.