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Toronto Real Estate News

November 2018 Newsletter

Market conditions tighter in October 2018 - sales up and new listings down

Greater Toronto Area REALTORS® reported 7,492 sales through TREB's MLS® System in October 2018 – a 6% increase compared to October 2017.

The average sale price for October 2018 was up 3.5% on a year-over-year basis to $807,340. Price growth continued to be driven be the condominium apartment and higher density low-rise market segments.

Annual sales growth has been positive since the late spring. While the new mortgage stress test and higher borrowing costs have kept sales below 2016's record pace, many households in the Greater Toronto Area remain upbeat on home ownership as a quality long-term investment. A strong regional economy and steady population growth will continue to support the demand for housing ownership as we move into 2019," said Mr. Bhaura, TREB President.

There were 14,431 new Listings entered into TREB's MLS® System in October 2018 – down 2.7 %t compared to October 2017. The fact that sales were up and new listings were down year-over-year in October suggests that market conditions became tighter.

"Annual sales growth has outstripped annual growth in new listings for the last five months, underpinning the fact that listings supply remains an issue in the Greater Toronto Area. With municipal elections in the rear view mirror, all levels of government need to concentrate on policies that could remove impediments to a better-supplied housing market, including facilitating the development of a broader array of medium density housing choices," said Jason Mercer, TREB's Director of Market Analysis.

Click here to read October 2018 TREB Market Watch Report

Toronto Condo Prices Are Up Over 8.5%

Toronto condo prices reached a new high in both the city and the suburbs. TREB reported a condo average price of $562,523 in October, up 7.5% from last year. The City of Toronto saw the average condo price hit $603,153 up 8.6% from last year. Unsurprisingly, condo prices in the city are rising faster than those in the suburbs.

The annual percentage change is still very high, but continuing to decelerate. TREB’s 7.5% increase is lower than last month, and waaay lower than the 22.99% we saw this time last year. Also interesting to note how quickly gains are decelerating within the same year. Prices advanced a massive 6.85% in the first half of the year, and 2.44% in the second half. A slowing second half may be indicative of interest rates providing a little friction for prices.

New condo construction started on a record 8,150 new condominiums in Q3-2018, raising the total number of condos under construction to a new high of 67,581 units in 236 buildings. Projects under construction were 95% pre-sold on average.

“The condominium market has performed exceptionally well during its transition from an overheated 2017. Low supply and stabilized demand should continue to provide structural support for prices. However, signs of a slower pace of price growth ahead from factors including rising interest rates and higher completions should be factored into decision making with respect to purchasing investment units”, said Shaun Hildebrand, President of Urbanation.

Bank of Canada raises interest rate to 1.75%

The Bank of Canada has raised its benchmark interest rate by a quarter point for the fifth time since last summer, pushing up the cost of borrowing for Canadians.

The bank's rate is now set at 1.75 per cent. That's the highest it's been in almost a decade, dating back to December 2008.

Known as the target for the overnight rate, the benchmark is what Canada's big banks charge each other for short-term loans. It filters down to consumers, because it affects the rates the banks offer their customers for things like variable rate mortgages and savings accounts.

That's already happening, all of Canada's biggest banks increased their own prime rates by a quarter percentage point, from 3.70 to 3.95 per cent.

Canada's central bank has kept its interest rate at record lows for several years to stimulate the economy following the economic slowdown of 2008, but has since begun to ratchet it higher as the economy gets back on sounder footing.

Economists are expecting a few more rate hikes to come, but the bank hinted that it wants to see how current rates are affecting the economy before proceeding.

"In determining the appropriate pace of rate increases, [the bank] will continue to take into account how the economy is adjusting to higher interest rates, given the elevated level of household debt," the bank said.

In explaining its decision to raise the rate, the bank noted the recently announced free trade deal with the United States and Mexico as a reason for optimism about Canada's economy.

The bank also said it expects household spending to increase at "a healthy pace."

Mortgage renewals have entered a new era

As Canadian mortgages come up for renewal, many households are starting to experience what TD Economics has dubbed a “completely new phenomenon” – higher interest rates.

In a recent report, TD looked at the change to the conventional five-year mortgage rate over its term length. Essentially, this shows where rates for a popular product – the five-year, fixed-rate mortgage – stand upon renewal. For much of the past quarter-century, the change has been negative, meaning Canadians could expect lower rates come renewal time.

But earlier this year, the difference turned positive for the first time in about a decade, a reflection of shifting lending conditions as the Bank of Canada tightens monetary policy and bond yields head higher. Rates are still low by historical standards – the five-year rate was 4.43 per cent at the end of September, or 10 basis points higher than five years ago – but they are climbing.

And TD expects that trend to continue. It estimates the effective interest rate on outstanding mortgages to rise about 95 basis points from the third quarter of 2018 through the end of 2020. (A basis point is 1/100th of a percentage point.)

“About a quarter of fixed rate mortgages come due for renewal every year,” TD economists wrote. “So, in about four years’ time nearly all households with a fixed-rate mortgage will face a higher interest rate.” That represents a big chunk of the mortgage market. Most Canadians take out fixed-rate mortgages, surveys suggest, and five-year terms are common.

June 1, 2012

Elena Rozhkova speaks about Toronto Real Estate Market оn Radio Canada International, Russian Language Service (In Russian)