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#VerityUpdates – Real Estate Market Update February 2020

#VerityUpdates – Real Estate Market Update February 2020

What the heck is going on? The past 6 weeks of 2020 have seen insatiable demand for all home types in the downtown core. Economic fundamentals generally remain strong with Toronto’s unemployment holding at 5.7% and the country’s inflation at 2.2%. Uncertainty around the US election, how Brexit is going to unfold and fears of a global economic slowdown as a result of the coronavirus outbreak are looming over our head but I don’t believe these are the reasons why the demand has been so strong.

The average detached home price in the downtown core surged to $2.1mil in Jan (over $1.57mil in December) but with 7 sales, it’s easy for that average to be skewed in either direction. Months of inventory jumped to 3.7 months, which sounds like a lot, but when you consider the 26 active listings at the end of last month, again, I would take this surge of inventory with a grain of salt and wouldn’t interpret this as a market balancing in any respect.

Semi-detached homes averaged $1.33mil but what is worth noting in this market segment is the lack of inventory in the downtown core. 18 active listings at the end of last month means you can expect bidding wars in almost every situation in this market segment.

Condos – Average price jumped to $821k last month versus $724k in December. An almost $100K jump. Keep in mind that this jump can be impacted by a number of larger sales. The number of active and new listings wasn’t insanely different from previous ‘Jan’ months but we’re most interested in how the next 30-45 days will unravel. Without more inventory, the market will continue to be heavily tilted in favour of Sellers in the short term.

We are expecting 30,000 new condo completions this year which is a much higher completion than we’ve experienced in the past, so we’re forecasting a settling of price appreciation (hopefully single digit growth) as this inventory comes to completion. Note that the rental market is slowing. The sky is not falling, but for the past few months, we’ve been commenting on the slowing of the rental market and steadying of rental rates. With the new completions scheduled for this year, we anticipate this trend to continue and hopefully, the resale market will experience the same as double digit home price growth is not sustainable given current income levels for most Torontonians. Any buyer being ‘sold’ a new construction condo at $1400-$1600psf+ and is being told that $6-$6.50psf rental rates are generally attainable over the coming 12-30 months should be very careful and analyze their expected returns and deposit requirements if this is not achieved.

 

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Brandon Ware

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