June 7, 2018 | Market Update
Toronto’s May housing market wasn’t full of big surprises. However, there were some relatively small (but still noteworthy) developments. Sales and home prices were down year-over-year, reflecting the unusual market conditions of 2017 and the impact of recent stress tests. That said, there were indications of increased competition, which is expected to lead to price growth in the second half of 2018.
On April’s track
This May, there were 7,834 home sales reported through Toronto’s MLS System. This number represents a 22.2 per cent drop from May of 2017. The average selling price was also down year-over-year by an average of 6.6 per cent across home types. Condos (which saw a 5.7 per cent increase) were the exception.
In some respects, the story of Toronto’s May market is much the same as it was the previous month. Given what an unusual year 2017 was, the year-over-year numbers aren’t surprising. But in April, signs of stabilization were encouraging.
May was also promising, as the annual rate of decline for home sales dropped from the three previous months (in February, March, and April it was over 30 per cent). That said, from a month-over-month perspective, May’s seasonally-adjusted sales numbers were basically flat compared to April’s.
Competition on the rise
While there were no dramatic changes between the April and May markets, there were indicators that conditions are becoming tighter. On a year-over-year basis, new listings were down more than sales were. This discrepancy suggests that buyers in the Greater Toronto Area (GTA) were in competition with one another.
Increased competition for homes usually leads to stronger price growth, and there’s reason to believe that Toronto’s market is heading in that direction. Jason Mercer, Director of Market Analysis for the Toronto Real Estate Board (TREB) noted that tighter conditions “will provide support for home prices as we move through the second half of 2018 and into 2019.”
Supply an ongoing issue
Market analysts are drawing some conclusions about potentially beneficial housing policy changes. One of the major takeaways from May has to do with housing supply.
Purchasing a home in the city is still a good investment. However, TREB President Tim Syrianos noted that many residents are having difficulty finding housing that suits their current needs. A recent study from the Canadian Centre of Economic Analysis found that a large number of Torontonians are living in houses with empty bedrooms. This “over-housing” has occurred because homeowners don’t believe there are alternative housing types available for them. In part, these conditions explain why new listings are low.
Citing the recent housing study, Syrianos noted that “policy makers need to focus more on the ‘missing middle’ — home types that bridge the gap between detached houses and condominium apartments.” It will be interesting to see how this challenge is addressed in the months ahead.
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