Toronto and GTA Markets in October 2020
This is the recently released report of the Toronto Regional Real Estate Board concerning the October 2020 results:
”November 4, 2020 – Home sales in the Greater Toronto Area (GTA) were up again year-over-year for the fourth month in a row. Our Members made 10,563 sales as reported through the Toronto Regional Real Estate Board’s MLS® System in October 2020. This was up by 25.1 per cent compared to 8,445 transactions in October 2019.
Sales and new listings reached record levels for the month of October. However, year-over-year growth rates for sales and new listings diverged in some market segments. In the detached market segment, the pace of annual sales growth far outstripped growth in new listings. Conversely, the condominium apartment market segment experienced more than double the new listings compared to October 2019, whereas sales were only up by 2.2 per cent over the same period.
“Competition between buyers of single-family homes, and particularly detached houses, remained strong last month and continued to support double-digit annual rates of price growth in many GTA neighborhoods. In contrast, condo buyers have benefitted from much more choice compared to last year. Pre-COVID polling had already pointed to an increase in investor selling in 2020. The pandemic only added to this trend with a stall in economic growth and a halt to tourism impacting cashflows for many investors,”
said Lisa Patel, TRREB’s President.
The MLS® HPI Composite Benchmark was up by 10.8 per cent on a year-over-year basis in October 2020. The average selling price for all home types combined was $968,318 – up by 13.7 per cent compared to $851,877 in October 2019.
“Year-to-date home sales through October were above last year’s level. The economic recovery in some sectors coupled with low borrowing costs has kept home purchases top-of-mind for many GTA residents. With this being said, we have not accounted for all of the pent-up demand that resulted from the spring downturn. Expect record or near-record home sales for the remainder of 2020,”
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
$910,138 February
$902,787 March
$820,222 April
$863,523 May
$931,226 June
$943,777 July
$951,437 August
$960,712 September
$968,318 October
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 $968,318 achieved in October exceeds the all-time peak, namely, last month at $960,712, 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 could easily 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. This has continued into the Fall with both September and October indicating growth.
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. A second wave in late September reduced the number of Open Houses. Lighter restrictions by the Province will commence on 7 November 2020.
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. Within the last three decades, 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 $968,318, that’s an increase of $237,846 which is a 32.56% increase over the forty six (46) month period. Expressed over 12 months, that’s an 8.49% annual increase.
2018 started with $734,837 and we are now at $968,318, that’s an increase of $233,481 which is a 31.77% increase over the thirty four (34) month period. Expressed over 12 months, that’s an 11.21% annual increase.
2019 started with $749,019 and we are now at $968,318, that’s an increase of $219,299 which is a 29.28% increase over the twenty one (22) month period. Expressed over 12 months, that’s a 15.97% annual increase.
Why don’t we try the short term numbers for just 2020? 2020 started with $838,662 and we are now at $968,318, that’s an increase of $129,656 which is a 15.46% increase over the ten (10) month period. Expressed over 12 months, that’s an 18.55% annualized increase, if the increases continue at 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 15.46% increase. This is more conservative and more realistic.
So, what’s the percentage rate of increase to November?
From 2017 8.49% calculated
From 2018 11.21% calculated
From 2019 29.28% calculated
From 2020 15.46% annualized estimated
The most accurate number here is the 8.49 % 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 $968,318, that’s an increase of $48,704 which is a 5.29% increase over the forty two (42) month period. Expressed over 12 months, that’s a 1.51% 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 8.49% or 1.51%.
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, with no property at all to show for it. 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 October of 2019. That’s specifically, those particular 12 months. My comparison was to the commencement of the 2019 calendar year, which took into account 22 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 7,194 4,982 up
March 7,945 7,132 up
April 2,958 9,005 down
May 4,594 9,951 down
June 8,654 8,826 down
July 11,041 8,555 up
August 10,757 7,682 up
September 11,062 7791 up
October 10,563 8,446 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 2020, but picked up in May and basically fully recovered in June. August, September, and October sales substantially 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 October 2020 (17,802) actually exceeded those in October of 2019 (13,053). Increased inventory will obviously have a negative effect on prices. A factor to take into consideration would be specific categories. For example, there are many new listings for condominium apartments in downtown Toronto. This is due in part to the rental market and the virtual shutdown of Air B&B facilities.
The Federal Government and the Provincial Government have provided funds to those who can’t work due to Covid, assisted commercial tenants paying rent, eliminated evictions and lowered interest rates.
We have yet to see a decline in the commercial or residential markets due to the global economic crisis as had been predicted. It may simply be due to the difficulties with the legal system and government intervention. However, the impact is inevitable, we are simply deferring it sometime into the future.
We should soon see evidence of the commercial impact. Restaurants which having been struggling to maintain some customers with outdoor patios will soon see them disappearing. The Province implemented a shutdown due to the second wave. Those restrictions are lightening up effective 7 November 2020. Except in some rare instances, outdoor patios will be closed.
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 ninth 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 to 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
