Recently, Royal Bank of Canada released a brief report for May 2018, commenting on the Greater Toronto Area’s and Greater Vancouver’s housing markets. According to RBC, the markets are balanced!
It’s important to note that May 2017 is when sales really started to drop off in Toronto due to the introduction of Ontario’s Fair Housing Plan in late April. So we may see the year-over-year comparisons narrowing as the year progresses.
For May 2018, the Toronto Real Estate Board reported a 22.2% year-over-year drop in resales, while the Real Estate Board of Greater Vancouver had an even bigger fall of 35.1%. RBC expected this slowdown and says it’s actually a good thing.
The drop in sales is a sign of the market correcting. When it comes to Toronto’s sales-to-new listings ratio, demand-supply conditions are balanced. Based on RBC’s chart, any lower and we’d actually be in a buyer’s market.
Thinking of Toronto as a buyer’s market seems odd following a year with such a drastic price spike. We can see how some buyers may also be apprehensive about entering the market because of news of prices and sales dropping.
“Market conditions are becoming tighter in the Greater Toronto Area and this will provide support for home prices as we move through the second half of 2018 and into 2019,” said Jason Mercer, TREB’s Director of Market Analysis, in the latest TREB resale report. “There are emerging indicators pointing toward increased competition between buyers, which generally leads to stronger price growth. In the City of Toronto, for example, average selling prices were at or above average listing prices for all major home types in May.”
TREB is saying competition between buyers is heating up and RBC is reporting a balanced market, trending more towards a buyer’s market (when there are way more homes for sale than there are buyers). We’re not sure where we actually stand.
RBC says we shouldn’t worry, the GTA housing market is not in a “death spiral.” In fact, month-to-month prices in the resale market have increased for four consecutive months, including May. Year-over-year, the average selling price in May dropped 6.6% (The MLS Home Price Index (HPI) Composite Benchmark was down by 5.4%).
And we can’t forget about the GTA’s resale condo market, which is still seeing year-over-year average price increases. Condos were the only housing type last month to see positive price growth compared to last year, increasing 5.7% to just over $560,000.
If new listings outpace sales this summer, we may actually find ourselves in a buyer’s market!