This year’s outlook leans heavily on the issue of supply and demand:
TREB reported 4,851 sales in January, up 15% from 2019, while only 7,836 new listings came online – a decline of 17% year over year.
This trend is pushing Toronto into sellers’ market territory with a sales-to-new-listings ratio of 58.4% (with 60% or higher being an indicator of a sellers’ market).
Nothing demonstrates this more clearly than a recent sale we facilitated for one of our clients.
The property: 341 Kingston Rd, Toronto
- 3 bedrooms
- 1 bathroom
- Fronting on Kingston Rd (Lot size 19.79 x 107)
- 2 car parking
Our team facilitated an amicable dissolution of the existing tenancy, and then based on our indicators of market conditions and current levels of supply we prepared for a quick sale in the first week of February. Some minor repairs, a re-paint, some basic staging and a thoughtful pricing and marketing strategy helped position this property effectively.
We planned for at least 7 days on the market with two public open houses. Within the first two days we had 53 showings. An agent came forward with one offer, which we were able to work into seven competing bids in the span of just a few hours.
We worked quickly to organize the offers and negotiate clearly and effectively for our client. The property was listed for $699,900.00 and was sold firm by the evening of the second day for $891,341.00.
This kind of aggressive buying activity on a property that has not been updated recently and is situated on a major roadway suggests that we may be much closer to a buyer’s market than statistics suggest.
The average sale price for the GTA rose in 2019 by 4%, with the condo segment experiencing the strongest year-over-year price growth, of 9%.
A recent Ipsos survey suggests that the majority of home buyers moving into 2020 can qualify for mortgages 2% higher than negotiated contract rates – signaling that the impacts of the stress test are largely behind us. Embolden that buyer confidence with strong average incomes, low unemployment and a lack of exciting inventory and you have the makings of a motivated and very frustrated pool of buyers.
We’re predicting an average sale price increase for Toronto at approximately 10%.
As mentioned in previous years: one soft spot in the market that we’ll continue to monitor are the shrinking profit margins for condo investors. In 2019, the average spread between average rental rates and average mortgage principal and interest payments was a mere $209.00, a paltry profit, particularly when we further deduct condo fees and property tax. Increased supply through 2019 also caused lease rate growth to recede by 5% compared to 2018.
These trends when examined next to the prospect of further government intervention in the rental market and the uncertainty surrounding continued value appreciation and the overall integrity/quality of the actual developments may push some investors to consider cashing out of that segment altogether in search of the more-secure, albeit more expensive: multi-unit rental property. This could result in increased inventory of condo suites for sale – a potential headwind for condo sale prices over the next three to five years.
If you’ve considered selling an underperforming asset, you may have a unique opportunity in Q1 and Q2 to take advantage of unusually low levels of inventory across the city. After more than three years of muted growth and activity across the GTA, we are anticipating a strong recovery year fueled by a continued shortage of inventory
We’d like to thank all our clients for trusting our team with your investment properties. It really is a pleasure to represent you and your families.
We hope you’ve found this market outlook useful. If you have questions or comments don’t hesitate to contact us. We’re here to help.
References: TREB & PWC