It’s no surprise that Toronto’s 2017 sales numbers pale in comparison to the record-setting 2016.
There were almost 20% fewer sales throughout the year in comparison to 2016, with many buyers waiting for prices to bottom out and sellers holding out for long-term price growth.
2017 did show growth in the price sector.
The average selling price for all home types across Toronto was approximately $823,000. Home prices and home price growth also differed throughout 2017. Year-over-year average price growth of over 30% was reported in the first quarter. This was arguably one of the triggers that prompted the announcement of the FHP (Ontario Fair Housing Plan). Following the onset of the FHP, sales declining and listings increasing, market conditions started to balance out, with the annual rate of price growth moderating in the second half of the year.
The calendar year 2017 average selling price was up by 12.7% annually. Although annual growth in the average price was generally positive on a year-over-basis throughout the year.
Everything is segmented
Different home types proved to have their own unique markets in 2017, each with their own ups and downs. The detached home market segment, usually the most expensive, experienced the slowest pace of growth. Buyers looking for less expensive options flocked to condominiums, as did investors and primary residents.
The result: Double-digit growth in the condo sector, with condo rental prices jumping with it.
Looking Forward into 2018
The forecast range for TREB MLS® sales in 2018 is between 85,000 and 95,000. The midpoint of this range suggests an annual sales count slightly lower than the 2017 total.
It is anticipated that year-over-year declines will be more pronounced in the first four months of 2018, as comparisons are made to the record pace of sales at the beginning of 2017.
Conversely, sales are expected to be up on a year-over-year basis as we move through the late spring and summer months.
Intending buyers supports a flatter sales trend in 2018, with buying intentions lower compared to a year ago. Of particular note is the dip in first-time buying intentions over the past year.
There remains a degree of uncertainty in the marketplace due to the psychological impact of the Ontario Fair Housing Plan and changes to mortgage lending guidelines.
The forecast range for the average selling price in 2018 is between $800,000 and 850,000. The midpoint of that range suggests a slight increase in the average selling price this year.
Similar to sales, year-over-year declines in the average selling price will likely be reported in some months during the first half of the year, as comparisons are made to the high price levels reported at the beginning of 2017. During the second half of 2018, annual rates of price growth will be in the mid-single digits, with enough competition between buyers to see rates of growth above the rate of inflation.
Expect tight market conditions for condominium apartments to underpin continued double-digit rates of price growth in this market segment. Conversely, the pace of growth for more expensive detached homes will be less brisk.
With that being said, Fundamental demand drivers promoting housing demand will remain in place in 2018, including immigration-driven population growth, job creation and low unemployment across a diversity of economic sectors. However, we must be cognizant of the fact that, in the short term, higher borrowing costs and the effects of federal and provincial policy decisions will act as a drag on demand for housing ownership. It is also probable that provincial rent control legislation will stunt the supply of available rental units, resulting in a continuation of average rent growth well-above the rate of inflation.
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