Arlene Mazerolle

May Market Report

24 May 2018
Arlene Mazerolle


Toronto Condo Market Report 

 

Sales Commentary

April sales on the Toronto Real Estate Board were not much better than in March. Month over month, they were up by just 8% and they were 32% lower than for April of 2017 – the peak sales month for 2017. While new lending rules are having an impact, weather also slowed sales over a 10-day period in April. Starting in May, we are seeing an increase in sales activity and are forecasting 8900 sales for the month – about 12% lower than for May of 2017 (which was the last strong sales month of 2017). The test will be if monthly sales for the balance of the year outperform those of 2017! Our guess is that they will. 

In the condo market, sales were down by 26% in April over April of last year. Downtown condo sales were off by 27% and in Humber Bay Shores by 40%. The problem for these markets is not enough listings. The ratio of sales to ‘active’ listings is 88%. It should be 35-50% in a normal market. Vacant condos are not being offered for sale, but instead are being leased at rents 10-15% higher than a year ago (thanks in part to young people being unable to qualify for mortgages based on qualifying at ‘posted’ rates set by the banks.)  Only in Canada can you get a five-year variable mortgage at 2.45% but you need to qualify at 5.34%!

TREB MLS Sales

This chart plots monthly MLS® sales for the current year and the previous three years. The recurring seasonal trend can be examined along with the comparisons to previous years for each month.

Source: Toronto Real Estate Board

Rental Commentary

Thanks to both levels of Government, the rental market is on fire. Young people can’t qualify for a mortgage, so, they turn to renting. Then, with rent controls in place, existing tenants are staying put and vacant units are getting multiple offers. A new agent loaded his first listing for lease and got five offers in the first hour – even from people who had not seen it. He wondered whether he had listed too low and we said it will go over list, so don’t worry.

Last month, we had over 1100 rentals in the downtown condo market. This month, it was 1500. Studios were leasing for over $1700 per month. There were over 1,000 one-bedroom units leased. The entry point was $2100 for a unit without a den or parking. The high end of this market was over $2400.
The two-bedroom market starts at $2700 and goes to $4,000 for parking and a den. The three- bedroom market is now at $5,000 per month.

With rent controls, Landlords are getting greedy. They know that they cannot get more than the maximum allowable increase in subsequent years if a tenant stays. This year the allowable increase is 1.8% (when utilities, property taxes, and salaries are averaging 3+%). Hence, we are seeing an unusual number of list price reductions in this market. Still rental prices are 5-10% higher than last month!

Downtown Condo Rental Prices

As of April 2018
Downtown is defined as South of Bloor to the water, and Dufferin to the Don Valley Parkway.
Source: The Toronto Real Estate Board