Greater Toronto real estate is seeing a big jump in sales, and it’s mostly people fleeing to the burbs. Toronto Regional Real Estate Board (TRREB) data shows it was the most sales for July in at least a decade. The increase in sales was primarily driven by a surge in the 905, where inventory is falling behind demand. The City on the other hand, is seeing new listings grow at three times the pace of sales.

Greater Toronto’ Real Estate Prices Make Abrupt Jump

The price of a typical home, all types included, made an usually large increase during the pandemic. The TRREB benchmark price reached $880,400 in July, up 10.01% from the same month last year. The City of Toronto reached $967,900, up 9.06% over the same period. This isn’t just unusual during a pandemic, it’s an unusual trend for the history of Toronto real estate prices….CLICK for complete article

Greater Toronto Area Market Update

The Greater Toronto market has experienced a prolonged uptrend which has propelled prices up 127% since 2010. The aggregate average sales price had initially peaked in 2017 at $920K (125% Growth over 7 years), with June 2020 recording a $930K price. These two data points are seemingly creating a double top for the GTA real estate prices.

The first break in the armour was the rapid uptrend (green line) established in 2016, which rose prices over $290,000 in a year and a four months. That uptrend broke in 2017. The rapid uptrend was not sustainable growth rate, prices subsequently retreated back to our forecasted higher echelon of the lower threshold $750K during the end of 2017 and into 2018.

Eitel Insights analytics is noticing a double top is forming in the GTA prices. After the creation of the first peak in 2017 with current prices representing the second peak. After peaks comes valleys, the GTA has remained in an impressive uptrend since the market took a temporary pause in 08-09. That uptrend (black line) is about to encounter a serious test which will cause market volatility.

Prices will begin to search for their market cycle lows, just like every other market cycle previous. The chart has identified a few pricing thresholds that will be tested in the upcoming months and likely years. Eitel Insights anticipates the market bottom to occur and create a channel which the market will remain likely until 2025.

With a double top forming in the price chart, we next take a look at the supply demand factors. Inventory has seen the bottom during December 2016 with only 4700 active properties. The most recent bottom came during 2019 with over 7400 active listings. Still well below the 15 year average of 17,800 actives, but a higher low none the less. Equally as important, the data is officially breaking the downtrend that had been in play since 2013 signalling that trend has completely come to its end. Going forward we anticipate inventory to continue in an uptrend meaning with higher lows and higher highs in the reported data.

The magical number of 21,000 active listings which hasn’t been broken in the past 7 years, will eventually relent in the upcoming several quarters. Inventory had been getting sold in record time and record money in years previous, this in turn has kept the inventory a nominal levels, while increasing the asking price.

The sales chart demonstrates there has been less demand at current prices, a trend which has been developing seemingly unnoticed by most. Sales are not low in 2020 solely due to Covid-19. No, they have been trending lower since 2016. In fact sales have not remained above 10,000 since 2016. June 2016 had over 10,000 sales and the month ended with 12,000 inventory. Since then inventory levels have surpassed 19,000 each summer with ease, however the sales have not risen above 10,000 since, with one data point being the exception during 2017. That signals to Eitel Insights, increasing demand to sell with decreasing demand to buy.

Demand has waned. Up next anticipate an increase to the supply without nearly the amount of a buyer as years previous. This upcoming reality inevitably creates competition amongst sellers, which in turn, leads to lower asking prices. As with any cycle, the overheated frenzied activity eventually ends, and gives way to a whole new kind of chaos on the other end of the spectrum.

The condo market in particular will see a chaotic atmosphere, as newly completed properties begin to enter the GTA market in 2021 and predominantly in 2022. The flood of inventory that is on the horizon is eerie enough, throw in the investor market that hasn’t received rent since Covid-19 hit and cannot evict the tenant going through the proper channels until who knows when. Once the investors do get their properties back, selling will be on the mind. Unfortunately this example will occur by the hundreds, and the market will flood with new and older inventory.

The historical chart is calling for a similar market cycle to the one that occurred from 1989-2002. After a 4 year uptrend prices shot up 167% to reach the all-time high of $261K in April 1989. After peaking the search began for the market cycle bottom, which occurred multiple times throughout the 11 year price channel.

Eitel Insights is not calling for an 11 year channel, however we are stating that the market cycle began in 2017. 3 years later and the current data is simply confirming the previous high, as time marches on prices will begin to work their way lower and find that market bottom. We are forecasting a 24% correction, indicating prices will test the $700K threshold in the upcoming years. The bottom will likely occur in 2022, once the inventory has flooded the GTA.

Not all markets in Canada are created equal, some areas are closer to the bottom. While others still have significant percentage losses upcoming. Become an Eitel Insights client to find out which are which.

Dane Eitel, Eitel Insights

Condo sales prices were higher in June compared to May and the year previous, similarly sales were higher than the previous month and year as well. However to say that the Condo market is forecasted to go higher and that there is pent up demand, is simply a fallacy. There will always be a need to buy and sell, currently that is the case there… some demand and a lower demand than previous years. As prices continue to trend lower beyond the 10% current drop there will continue be sales. The market will never flat line, but remember just because the Greater Vancouver Condo market has a pulse, doesn’t mean it is out of critical condition.

In reality with how the current market sits, it is very hard to be positive about the Greater Vancouver Condo market, yet some still are. We explain why we are not and you shouldn’t be either.

Prices as mentioned were higher in June with the average price finishing at $679,294 albeit a measly 1 thousand dollars from May’s sales price of $678,495. Hard to get excited about those numbers. Especially since June was the month when the supposed pent up demand was expected to be released, after being housebound for 2 months. Prices are still down over 10% from the market peak in 2018. The pent up demand is a whisper in the wind compared to the rising pent up need to sell.

As the market progresses to feel the effects of the Covid-19 the mortgage deferrals will eventually come to an end. The tenants that haven’t paid will be asked to leave. Not to mention all the presold properties that will flood the market as the completions continue which a whole beast on its own. The inventory has no choice but to skyrocket.

Another sign of a faltering market is prices remaining steady while the price per square foot falls.

The price per square foot has fallen from the peak in April 2018 when condos were selling for $847 on average, to currently selling at $767 PPSQFT. The month over month drop was $34 per foot, the largest drop since 2018. The per square foot prices has fallen back to the upper edge of the downtrend.

This is signalling larger properties are selling for less money. With the average price remaining steady and the PPSQFT dropping results in a negative forecast for the condo market. Once higher valued properties sell at discount there will be less willing purchasers at the lowered valued properties as they begin to perceive the market is headed lower.

While we anticipate the Condo average price dropping around 30%, while we anticipate a 19-24% drop in the price per square foot chart. As the newly completed units become for sale or resale, the buyers will want new properties with warranties as the insurance issue continues. As a result elder buildings with higher square footage will sit on the sidelines until they drastically reduce their prices.

Inventory has finally broken out of the prolonged downtrend that propelled the inventory lower since 2012. During 2019 the inventory had temporarily surpassed the downtrend only to relent and retreat back into the comfort of a long term trend. Going forward we anticipate the downtrend to be broken for good, as inventory works its way back up to 5900 active listings, the near term high achieved in 2019.

With inventory surpassing 5000 for the first time since September 2019. Market prices are undoubtedly headed into the buyers favour as inventory continues to rise in 2021 and 2022.

There were over 2800 newly listed Condos in June the highest single monthly total since May 2012. Which elicits our point of pent up need to sell being more prevalent than any supposed pent up demand to buy let alone, invest. Furthermore the inventory rose over 1000 from new listing in May as the rise in Sales only ticked up 451 during the same time frame. The data is indicating a doubling of the inventory rise to that of sales.

As stated the Sales for the Greater Vancouver Condo market did rise to over 1000 sales in June, a significant rise from 655 in May. The numbers are better but far from glorious. The sales were the 2^nd worst June on the chart which goes back 15 years. The chart depicts the sales data squarely in the middle of both the downtrend and the low sales channel.

Not all markets in Greater Vancouver are created equal, some areas are closer to the bottom. While others still have significant percentage losses upcoming. Become an Eitel Insights client to find out which are which.

Dane Eitel, Eitel Insights

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