TweetThe first month of 2012 began strong reporting 4,567 residential properties sold, an 8.8 percent increase compared to the 4,199 properties reported sold in January 2011. January’s result could have been even stronger if there was a sufficient number of available properties to meet buyer demand. During January some of Canada’s major banks offered promotional mortgages that saw interests rates plummet to 2.9 percent for 5 year fixed terms. This inturn drove buyers to market, trying desperately to capitalize on these low mortgage rates. Competing offers on properties that came to market were the norm.
In January 9,655 new properties were listed for sale by sellers. This was 8 percent more than the 8,937 that came to market in January 2011. Unfortunately the increase in new listings as compared to last year did not improve the overall supply. At the end of January there were only 11,009 residential properties available for purchasers to buy. This is a decline of more than 9 percent compared to the 12,107 properties that were available at the end of January 2011. The inventory of 11,009 available properties represents a supply of only 2.2 months, far from a balanced market. In some neighborhoods the supply of inventory is even less. For example, in the neighborhoods immediately east of the central core of the City of Toronto there is only 1.4 months (on average) of available resale housing. These conditions will lead to fierce competition for properties that become available, resulting in an increase in sale prices.
Base on the tight market conditions we are experiencing it is not surprising that all properties that came to market sold quickly. In the greater Toronto area on average all properties sold in 32 days. This compares to 36 in January 2011. In the City of Toronto sales were slightly faster, taking only 31 days. Central properties also took 31 days on average to sell. Properties sold very quickly in Toronto’s eastern neighborhoods, while Toronto’s western districts lagged behind dragging Toronto’s over-all days on market down. Eastern properties sold in only 27 days, with eastern neighborhoods close to Toronto’s central core (Riverdale, Leslieville, The Beaches) all selling on average in less than 20 days.Western neighborhoods took 38 days to sell.
Although 32 days on market was slower than the brisk pace of sales throughout the fall months, 32 days on market for January,historically a slow month, is quite an accomplishment.We anticipate that this pace will accelerate as the market gears up for the seasonally more active spring market.
In January the average sale price of all properties sold in the greater Toronto area was $463,534, an increase of 9 percent compared to the $425,762 recorded in January of 2011. Increasing average sale prices has given rise to a greater number of high end sales (properties having a sale price of $1Million or more). In January 201 properties fell into this category. This compares vary favorably with the 145 properties having a value of $1 Million or more sold in January of 2011. In 2010 there were only 137, and shockingly a mere 28 were reported sold in January 2009, a period of world wide economic turbulence. Some neighborhoods in Toronto are becoming more pricey. For example the average detached home sold in central Toronto came in at $1,151,542, double what the average detached home sold for in the east ($ 517,449) and Toronto’s western districts ($560,451).
As we stated in the December Market Report, forecasts for 2012 for the greater Toronto market place remain positive. January’s performance is certainly consistent with the forecasts of the Toronto Real Estate Board and Canada Mortgage and Housing Corporation. There are some concerns that historically low mortgage rates and a lack of resale inventory have driven house prices to unsustainable levels. Last year sawToronto’s average sale price increase by 8 percent compared to 2010. Notwithstanding these price increases, affordability continues to favour buyers. Based on the average income for Toronto families ($82,000), the average priced home ($463,534) is still within reach. Based on even a 10 percent down payment, mortgage servicing costs still remain below lending institutions 32 percent gross debt service ratios. The key to the market’s continued strong performance remains low mortgage interest rates. If and when they begin to rise the market will become less frothy and move to a more balanced state.
By: Chris Kapches, Senior Vice President Chestnut Park Real Estate
Chestnut Park Real Estate Limited, Brokerage
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