Sales are down. Inventory is up. Is the Toronto market finally correcting itself? More importantly, what does it mean for buyers and sellers?
First, let’s take a look at the raw numbers.
Total Sales in May:
Average Sale Prices:
What the numbers tell us:
- Total Sales are down –20.3% compared to May 2016
- Average sale price is up +17% compared to May 2016
- Average sale price is down -4.3% compared to last month – April 2017
Inventory for May 2017 is up +48.9% at 25,837 listings (vs. 17,356 listings in May 2016). This number is deceiving. More on this below.
If inventory is up nearly 50%, and the total number of sales is down more than 20%, how is it that prices haven’t plummeted?
Let’s take a look:
How the Media is presenting the data:
- The Ontario Fair Housing Plan has been the catalyst of change, especially in regard to foreign investment. Less foreign investment is resulting in less competition and lowering sale prices.
- As a result, buyers are “pumping the brakes” on bidding wars and bully offers.
- Speculators are rushing to market to sell before rising prices start to plummet, resulting in a large spike in inventory.
- Prices are finally going down. Buyers can now afford to get into the market.
- With more inventory, buyers are being more choosy.
- Buyers are speculating that prices will fall, holding back on offers and putting sellers in the passenger seat.
How we look at the data:
- Consumer perception of the Ontario Fair Housing Plan (OFHP) has had an impact on buyer and seller behaviour. The plan itself will have minimal to no long term impact other than more tax grabs for the Ontario government.
- It’s human nature to feel like you’re missing out when everyone else is getting in on something and you’re not. The well timed announcement of the OFHP and the natural spike in listings we see every spring, combined with stress, anxiety and fear, has buyers “pumping the brakes” on bidding wars and bully offers, creating the perception that the race is finally over. However, prices are still steadily on the rise.
- We think inventory is up for 3 reasons: (1) Sellers are no longer terrified that if they sell their home, they won’t be able to find a new place to live (2) Data shows that listings have spiked in areas where foreign investment is higher than average (i.e. Richmond Hill) and (3) April 2017 was only the second time in history that there have been more than 20,000 new listings in a single month (The first was April 2010). In May 2017, with sales down -20.3% and inventory up +48.9%, there must be a surplus, right? While there were many more properties available in May versus a few months prior, most buyers will agree that there isn’t nearly 50% more listings than some of the highest months to-date. Here is the reason why: Sellers have been trying to fetch unrealistic prices for their homes. When they don’t sell, they are being forced to reduce their price and re-list it. Every time a property is re-listed, it counts as a new listing.
- Prices are not dropping and continue to climb steadily . The rate at which prices are increasing has slowed down (at least for now), but that does not mean prices are coming down. Prices are still up +17% since last May 2016, which currently holds the all-time record for the most sales in a single month.
- Buyers currently have an opportunity to pay less than they would have in April, but that won’t last for long. If you’re looking to buy, as always, NOW is the time. I predict that prices will continue to climb steadily, eventually outpacing the price you would have paid in April.
Statistics and numbers can easily be manipulated to tell different stories. The main factor that a lot of media and speculators fail to recognize is human behaviour. As predicted in April, the perception of the OFHP changes have caused a cooling effect on the market. Buyers will pay less now than they would have in April, but prices will continue to climb. If you’re looking to buy, now is the time. If you’re looking to sell, you may have missed the peak of the frenzy we saw in April, but you’ve likely already made an exceptional return on your investment; it will only continue to climb in value. Don’t speculate — sell when it makes sense for you.
As always, NOW is a great time to buy or sell and the GetToronto team is here to help. While we will continue to see a mixed fluctuation in stats, the overall market will continue to climb and property will continue to increase in value.