A lack of inventory and less pressure on homebuyers are the reasons given for the numbers coming out of Toronto regarding the city’s home prices, according to the Royal LePage House Price Survey. For the second month in a row, home prices continued to climb in Toronto while home sales continued to drop.
The chart above indicates that the average Toronto mortgage went up by 5.9 per cent to $558,900 on detached bungalows; 5.4 per cent on two-storey homes; and 2.7 per cent on condominiums.
Although economists have been predicting a 10-25% drop in home prices over the next several years, there are a few reasons why sellers in Toronto are still able to ask as much as they are. One of those reasons is due to the resale value of older buildings. While there is certainly a lure to a condo unit that’s brand-spankin new and in which nothing has ever been used, the older condos in Toronto are also extremely attractive. These, says Gino Romanese, senior vice president at Royal LePage Services, have a lot more of the character people are looking for in a condo, and they are typically also larger than newer units.
And while that market softening might be on the way, there is still a lot of opportunity for Torontonians that feel now is the right time for them to get into the market.
“Last year, buyers looking to purchase in Toronto felt a lot of pressure to get into the market as quickly as possible, before prices continued to increase at above average rates,” says Mr. Romanese. “Given all the recent talk about a slowing Canadian housing market, buyers feel like they have more time. However, Toronto is still seeing multiple offers on a weekly basis and appropriately priced homes are selling for at least asking price.”
But what about that drop in home sales?
“A drop in the number of homes trading hands typically precedes a period of softening house prices,” says Phil Soper, president and chief executive at Royal LePage. “Where there is reduced demand, those that want to sell their homes adjust their asking price to stimulate interest. Home sales were positive in July, fell in August, and we are expecting September to show a decline as well.”
But, it’s not all bad. Mr. Soper says that even if activity isn’t what it was even just two months ago, it’s a temporary situation.
“While hard-hit in the short-term, we expect first-time homebuyers to adjust to the tougher mortgage qualifications. The dream of home ownership is very much alive among young Canadians. They may remain renters for some time as they save; some will opt for less expensive neighbourhoods and will purchase smaller homes,” says Mr. Soper. “In the meanwhile, we will feel their absence in national sales statistics.”
