Toronto and GTA Markets in July 2020
This is the recently released report of the Toronto Real Estate Board concerning the July 2020 results:
“AUGUST 6, 2020 –
Toronto Regional Real Estate Board President Lisa Patel announces that Greater Toronto Area REALTORS® reported 11,081 sales through TRREB’s MLS® System in July 2020 – a 29.5 per cent increase over July 2019 and a new record for the month of July. On a preliminary seasonally adjusted basis, sales were up by 49.5 per cent compared to June 2020.
Year-over-year sales growth was driven by low-rise home types, particularly in the regions surrounding the City of Toronto. However, condominium apartment sales were also up on an annual basis, including in Toronto.
Total new listings were also up strongly on a year-over-year basis by 24.7 per cent, but this annual growth rate was less than that of sales, which means market conditions tightened on average compared to July 2019. In addition, active listings at the end of July were down by 16.3 per cent.
“Sales activity was extremely strong for the first full month of summer. Normally we would see sales dip in July relative to June as more households take vacation, especially with children out of school. This year, however, was different with pent-up demand from the COVID-19-related lull in April and May being satisfied in the summer, as economic recovery takes firmer hold, including the Stage 3 re-opening. In addition, fewer people are travelling, which has likely translated into more transactions and listings,”
said Ms. Patel.
The July 2020 MLS® Home Price Index (HPI) Composite Benchmark was up by 10 per cent compared to July 2019. The overall average selling price was up by 16.9 per cent year-over-year to $943,710.
On a preliminary seasonally adjusted basis, the average selling price was up by 5.5 per cent compared to June 2020. Price growth was strongest for low-rise home types, notably within the City of Toronto. Despite more balanced market conditions in the condominium apartment market segment, year-over-year price growth remained in the high single digits.
“Competition between buyers continued to increase in many segments of the GTA ownership housing market in July, which fueled a further acceleration in year-over-year price growth in July compared to June. On top of this, we also experienced stronger sales growth in the more-expensive detached market segment, which helps explain why annual growth in the overall average selling price was stronger than growth for the MLS® HPI Composite benchmark,”
said Jason Mercer, TRREB’s Chief Market Analyst.”
Here are the average sale prices as reported by TRREB for single family homes of all types in the GTA, including houses, townhouses and apartments starting at the beginning of 2018 until now:
Average Prices Month
$734,837 January 1st
$735,874 January 31st
$749,019 January 1st
$747,175 January 31st
$838,662 January 1st
$838,078 January 31st
For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 2019 and 2020 have had to be restated. A few transactions may have fallen through and not closed as originally scheduled. Consequently, TRREB deletes them and re-enters them in the proper month. That will throw the average prices off by a few hundred dollars if you are looking back at previous monthly reports for consistency. Changes are more likely for the most recent months. This time changes have gone back to November 2019.
The average price of $943,710 achieved in July exceeds the all-time peak, namely, last month at $931,221, and the previous market peak in April 2017 at $919,614.
What usually happens each year? The market starts off in January, rises in February, gains momentum in March and April and reaches its peak for the year in May. The market declines in June, declines in July and then bottoms out in August. In September, it reverses itself and rises once again, and in October, it reaches its second peak for the year. In November, the market declines, as it does in December, and the cycle repeats itself the following year.
This year will undoubtedly be different due to the COVID-19 pandemic and the consequent global recession. The last part of March slipped sharply because of the lack of showings and interruption of the general marketplace. Thereafter, the market seemed to settle down. Inventory remained low, which continued to support pricing levels. No one had to “give away” their properties.
As the real estate industry introduced new precautionary measures and the public became accustomed to the new way of doing business, activity began to blossom. Indeed, there would be fewer showings, but those who saw properties were real buyers, not tourists. Open Houses are now a thing of the past but a prospective purchaser can see a property by 1) completing a Covid inquiry form and 2) agreeing to a Covid viewing protocol which will include limits on the size of the group, wearing masks and agreeing not to touch anything. This arrangement seemed to be satisfactory and the buyers again began competing with one another for the available properties which were in short supply.
Effective 12 August 2020, we are now back to normal as all of Ontario is in a position to host ‘open houses” should Sellers wish to host them and Buyers wish to attend. There are still “safe protocols” in place in order to thwart the spread of Covid-19.
Let’s undertake an analysis with respect to the rates of return achieved over the last several years. The purpose of this calculation is to smooth out the returns over a longer time period to produce more accurate results. This avoids the rise and fall in a month or two.
The market has declined substantially a few times. More recently, there are three examples: 1990, 2008 and 2017.
We will start with 2017 which was a year with a peak in the market and the sudden drop. 2017 started with $730,472 and we are now at $943,710, that’s an increase of $213,238 which is a 29.19% increase over the forty three (43) month period. Expressed over 12 months, that’s a 8.15% annual increase.
2018 started with $734,837 and we are now at $943,710, that’s an increase of $208,873 which is a 28.42% increase over the thirty one (31) month period. Expressed over 12 months, that’s an 11.00% annual increase.
2019 started with $749,019 and we are now at $943,710, that’s an increase of $194,691 which is a 25.99% increase over the nineteen (19) month period. Expressed over 12 months, that’s a 16.42% annual increase.
Why don’t we try the short term numbers for just 2020? 2020 started with $838,662 and we are now at $943,710, that’s an increase of $105,048 which is a 17.89% increase over the seven (7) month period. Expressed over 12 months, that’s a 21.47% annualized increase. However, just because we can actually do the math doesn’t make it statistically significant. It will not increase at this current monthly rate for 12 months in a row. It never has, so it won’t this year either. And, that’s before the COVID-19 interruption. Beware of predictions. Our previous statistics were all based upon actual “past” performance.
So, what’s the percentage rate of increase?
From 2017 8.15% calculated
From 2018 11.00% calculated
From 2019 16.42% calculated
From 2020 21.47% annualized estimated
The most accurate number here is the 8.15 % annual increase from the beginning of 2017. It’s the longest time period, and is therefore the most steady and accurate. Historically, over one thousand years of history we have seen increases of over 5% per annum. So, this is certainly not new! This is a fairly consistent pattern.
We do run a substantial difficulty with everyone in 2017. If you bought in April 2017 at the peak, you paid $919,614. That property is now worth $943,710, that’s an increase of $24,096 which is a 2.62% increase over the thirty nine (39) month period. Expressed over 12 months, that’s a 0.08% annual increase, or eight tenths of one percent. You can appreciate what a significant difference is made by the starting point for the purposes of the calculation. Just four months, and we either have 8.15% or 0.08%.
It does speak to the decision for those who faced closing in 2017 after paying the high prices. They have no broken even, while those who failed to complete have suffered substantial losses. The message is clear: if you can close, do so, and hold on, because at some point the market will reward you.
As for TRREB, they want to undertake a comparison to July of 2019. That’s specifically, those particular 12 months. My comparison was to the commencement of the calendar year, which took into account 19 full months, and then expressed that, as a “12 month rate”.
The market had peaked in the early Spring of 2017, so this figure takes into account both the rise and fall in 2017. This is the market performance since the beginning of 2017.
The numbers to avoid are the very short term numbers. So, that would be what’s happening right now in 2020.
Volume of Sales
Month 2019 2018 Trend
January 3,968 3,987 down
February 4,982 5,148 down
March 7,132 7,188 down
April 9,005 7,742 up
May 9,951 8,402 up
June 8,826 8,024 up
July 8,555 6,916 up
August 7,682 6,797 up
September 7,792 6,414 up
October 8,446 7,448 up
November 7,054 6,206 up
December 4,364 3,746 up
Total 87,757 78,015 up
Month 2020 2019 Trend
January 4,550 3,968 up
February 7,201 4,982 up
March 7,958 7,132 up
April 2,961 9,005 down
May 4,601 9,951 down
June 8,701 8,826 down
July 11,081 8,555 up
You will notice that there were more transactions in 2019 compared with 2018.This trend put the pressure on prices. Buyers obviously chose to enter the market rather than continue to sit on the sidelines. Then, we had the big drop in sales from mid-March until the end of April in 2020, but picked up in May and basically fully recovered in June. July sales exceeded the 2019 figure, largely due to sitting on the sidelines during the Spring on account of Covid-19..
The prices in real estate are governed by supply and demand just like everything else. The buyers have returned and relatively speaking the inventory has not. Artificially, this provides “price support”.
We have yet to see a decline in the commercial or residential markets due to the global economic crisis as was predicted in the media several months ago.
We are now into the sixth month of our emergency crisis on account of the COVID-19 pandemic.
Some market trends that we are seeing now:
- Vast increase in the demand for cottages (leasing and owning)
- Increase in demand for properties with backyards (semis and detached)
- Increase in demand for properties in the suburbs and outlying areas
It’s impossible to predict the future, but we can certainly observe the trends in the marketplace to give us some guidance.
If you would like to discuss the market, please give me a call.
Brian Madigan LL.B., Broker