Toronto Condo Market Continues to Soar

Toronto area condominium apartment prices continued to move upward last month, with average prices 6% higher than February, 2018. Almost certainly we will see another all-time high for condominium prices before the spring is over. Under-pricing and bidding wars are rampant and buyers are eager (even desperate) to buy condos now before prices go even higher.

The story is quite different for house prices. The average selling price for freehold properties in February, while higher than in January, was 2% lower than last February. This was the third month in a row where freehold prices were lower than last year. As we have previously noted, the mortgage qualification rules introduced a little over a year ago continue to put a damper on prices of detached and semi-detached homes, even though prices and interest rates are no longer increasing.

While prices for freehold properties are flat to falling slightly across most of the GTA, there are a some exceptions. For example, prices in the ‘prime’ areas of Toronto’s east and west ends (central & south Etobicoke, High Park, Bloor West Village, Beach, Leslieville, Riverdale, etc) are increasing, and were about 5% higher in February than last year. In these areas, bidding wars are still quite common and there are few houses on the market at any given time.

Sales volume continued to fall in February. Total sales of all property types were down 2% year-to-date versus last year, which doesn’t sound so bad until you realize that last year’s sales were about 30% below the 2016 all-time high and only slightly higher than the low reached during the financial crisis in 2008. The falling sales are a result of declining affordability due to higher prices, higher interest rates and, in particular, the mortgage ‘stress test’ qualification rules introduced just over a year ago. As was described here, this is part of the general decline in sales across the country, which is causing a significant decline in economic activity, estimated to be about $3.5 billion. Now that interest rates and prices are moderating, a strong case can be made for relaxing or eliminating the mortgage stress test to reduce the chances of precipitating a recession prematurely.

Lower sales volumes have had the effect of moderating the inventory of homes for sale, so the market remains balanced overall, neither a buyers’ market nor a sellers’ market. This is because, while fewer would-be first time buyers are able to afford to buy a house, it’s also true that fewer would-be move-up buyers are able to afford a larger home. Basically we have a sort of gridlock situation which creates the appearance of a healthy market but perhaps not the full substance of same.