Toronto and GTA September 2020 Real Estate Market

By
Commercial Real Estate Agent with RE/MAX West Realty Inc., Brokerage (Toronto)

 

Toronto and GTA Markets in September 2020

 

This is the recently released report of the Toronto Real Estate Board concerning the September 2020 results:

“October 6, 2020 – Toronto Regional Real Estate Board President Lisa Patel announced that sales reported through TRREB’s MLS® System by Greater Toronto Area REALTORS® amounted to 11,083 – a new record for the month of September. This result was up by 42.3 per cent compared to September 2019.

Following a record third quarter, sales through the first nine months of 2020 were up by approximately one per cent compared to the same period in 2019.

“Improving economic conditions and extremely low borrowing costs sustained record-level sales in September, as we continued to account for the substantial amount of pent-up demand that resulted from the spring downturn.Further improvements in the economy, including job growth, would support strong home sales moving forward. However, it will be important to monitor the trajectory of COVID-19 cases, the related government policy response, and the impact on jobs and consumer confidence,”

said Ms. Patel.

Year-over-year sales growth in September continued to be driven by ground-oriented market segments, including detached and semi-detached houses and townhouses.

Annual growth rates were also higher for sales reported in the GTA regions surrounding the City of Toronto. The September 2020 MLS® Home Price Index Composite Benchmark was up by 11.6 per cent year-over-year.

The average selling price for all home types combined in September was $960,772 – up by 14 per cent year-over-year. Price growth was driven by the low-rise market segments. The relatively better supplied condominium apartment segment experienced a comparatively slower pace of price growth.

“On a GTA-wide basis, market conditions tightened in September relative to last year, with sales increasing at a faster pace than new listings. With competition between buyers increasing noticeably, double-digit year-over-year price growth was commonplace throughout the region in September, resulting in the overall average selling price reaching a new record,”

said Jason Mercer, TRREB’s Chief Market Analyst.”

 

REVIEW

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
 

2018
 

$734,837              January 1st

$735,874              January 31st

$767,801              February    

$784,514              March

$804,926              April

$803,440              May

$808,066              June

$781,918              July

$765,252              August

$796,814              September

$807,538              October

$787,741              November

$749,019              December

 

2019
 

$749,019               January 1st

$747,175               January 31st

$779,791              February

$788,133              March

$820,373              April

$838,248              May

$831,882              June

$806,971              July

$792,134              August

$842,421              September

$851,877              October

$843,307              November

$838,662              December

 

2020

$838,662              January 1st

$838,018                January 31st

$910,076              February

$902,777              March

$820,222              April

$863,474              May

$931,001              June

$943,609              July

$951,536              August

$960,772              September

 

For those following these numbers on a monthly basis, please note that some of the recent sales numbers in 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.

The average price of $960,772 achieved in August exceeds the all-time peak, namely, last month at $951,536, 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.

As the real estate industry introduced new precautionary measures and the public became accustomed to the new way of doing business, activity resumed. Indeed, there would be fewer showings, but those who saw properties were real buyers, not tourists. Open Houses resumed on 12 August 2020, but are subject to Covid-19 protocols. These new protocols have been adopted very well by both the industry and the public.

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 and notably the reference to the exact same month a year ago.

The market has declined substantially a few times. More recently, there are three examples: 1990, 2008 and 2017. The first two are largely historical now.

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 $960,772, that’s an increase of $230,300 which is a 31.52% increase over the forty five (45) month period. Expressed over 12 months, that’s an 8.40annual increase.

2018 started with $734,837 and we are now at $960,772, that’s an increase of $225,935 which is a 30.74% increase over the thirty three (33) month period. Expressed over 12 months, that’s an 11.18% annual increase.

2019 started with $749,019 and we are now at $960,772, that’s an increase of $211,753 which is a 38.05% increase over the twenty one (21) month period. Expressed over 12 months, that’s a 21.74% annual increase.

Why don’t we try the short term numbers for just 2020?  2020 started with $838,662 and we are now at $960,772, that’s an increase of $112,742 which is an 14.56% increase over the nine (9) month period. Expressed over 12 months, that’s a 18.20% annualized increase, if the increases continue as the same pace. 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. If the numbers simply held firm to the end of the year, we would have a 10.92% increase. This is more conservative and more realistic.

So, what’s the percentage rate of increase to September?

                                      

From 2017             8.40%                 calculated

From 2018            11.18%                calculated

From 2019            21.74%         calculated   

From 2020            10.92%         annualized estimated     

 

The most accurate number here is the 8.40 % 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 $960,772, that’s an increase of $41,7158  which is a 4.48% increase over the forty one (41) month period. Expressed over 12 months, that’s a 1.31% annual increase. You can appreciate what a significant difference is made by using a different starting point for the purposes of the calculation. Just four months, and we either have 8.40% or 1.31%.

It does speak to the decision for those who faced closing in 2017 after paying the high prices. They have now 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 September of 2019. That’s specifically, those particular 12 months. My comparison was to the commencement of the 2019 calendar year, which took into account 20 full months, and then expressed that, as a “12 month rate”.

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              4,547                   3,968           up

February             7,195                     4,982           up

March                7,946                    7,132          up

April                  2,958                    9,005        down

May                   4,595                      9,951          down

June                   8,655                      8,826          down

July                    11,048                  8,555         up

August              10,766                   7,682           up

September         11,083                   7791            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. August, and September sales subsrtantially exceeded the 2019 figures, largely due to buyers 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”. Now, the Sellers are coming back since the number of new listings in September 2020 (20,420) actually exceeded those in September of 2019 (15,616). Increased inventory will obviously have a negative effect on prices.

We have yet to see a decline in the commercial or residential markets due to the global economic crisis as was predicted. It may simply be due to the difficulties with the legal system. However, the impact is inevitable, we are simply deferring it sometime into the future.

We should soon see show evidence of the commercial impact. Restaurants which having been struggling to maintain some customers with outdoor patios will soon see them disappearing. Late October will be too cold to host outside spaces. Inside, there may simply be insufficient room for social distancing. This will force closures starting in November. The streetscape will change from restaurants and cafes to closed premises. This is undesirable for a neighbourhood.

With many office workers working from home, there is no need to attend at the downtown office towers. Zoom is available for meetings and it took a long time to wait for an elevator in the lobby, and much too long at noon.

When we are talking about office space, it was expensive, and employees occupied close quarters. Now, a company would require substantially more space. That being the case, it might be wise to rethink the entire office setup. Perhaps the suburbs would work. Perhaps ground floor would work, eliminating elevators, or perhaps one floor up (at most)?

Restaurants and food courts in the commercial underground pathways are largely vacant. Most are unlikely to survive.

COMMENT

We are now into the eighth 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
  •         Increased inventory of condo apartments (formerly Air B&B)
  •         Toronto based families looking to relocate in the 905 areas
  •         905 based families looking to relocate to 519 areas

It’s impossible to predict the future, but we can certainly observe the current 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

www.iSourceRealEstate.com

Comments (2)

Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Families on the move will appreciate your local market reports.

Take care, be safe and have a very productive month.

Oct 07, 2020 11:44 AM
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Great information.  Thanks for sharing and make it a wonderful day!

Jun 25, 2021 07:31 AM