Greater Toronto’s real estate industry may be optimistic about “firming,” but buyers disagreed last month. TRREB data shows real estate prices made a sharp downtick in June, after months of waiting for the market to firm. Last month’s sales marked the weakest June sales in 25 years, and its highest inventory on record. The board’s CEO attributes the issue to not just economic and financial issues, but the crime—specifically calling out car theft. Funny enough, crime has historically provided a big boost to the region’s home sales.
Greater Toronto Real Estate Prices Just Saw The Floor Give Out After Months of Stagnation
Greater Toronto real estate prices: The price of a TRREB composite benchmark home, in Canadian dollars.
Source: TRREB; CREA; Better Dwelling.
Greater Toronto real estate prices made an abrupt downtick. The price of a composite benchmark (typical) home fell 1.8% (-$17.7k) to $995.1k in June, pushing them 5.5% (-$58.4k) lower than last year. Not only was that a substantial monthly drop, but it marked the first time a typical home across TRREB fell below the $1 million mark in over 4 years.
Greater Toronto Real Estate Sales Slip To A 25-Year Low
Greater Toronto real estate sales: TRREB home sales for June.
Source: TRREB; CREA; Better Dwelling.
Greater Toronto homebuyers were noticeably absent last month. It was a historic absence, really. There were only 6,243 homes sold in June, down 2.4% from last year—which really doesn’t do this slowdown justice. It was the weakest June for Greater Toronto home sales in 25 years. Literally a whole generation hasn’t seen such weak existing home sales… and the region had a lot less people a quarter century ago.
Greater Toronto Real Estate Inventory Hits A Record High
Greater Toronto residential inventory: Active listings of homes for sale on the MLS for the month of June.
Source: TRREB; CREA; Better Dwelling.
Greater Toronto real estate didn’t see many buyers last month, but agents were busy with sellers. Greater Toronto saw 19.8k new listings in June, up 7.7% from last year. This marks the second-most new listings on record for the month, only surpassed by June 2017. For those that need a refresher, that was when the foreign buyer mini-bubble popped.
Fewer buyers and more sellers are helping inventory go past healthy and right to excess. There were 31.6k active listings at the end of June, an increase of 30.8% from last year. The region went from a brief inventory shortage to the most June active listings on record.
Where does the market head from here? Greater Toronto has seen weak sales and rising inventory for over a few months now, and prices have been largely resistant to declines. Sellers were holding out, waiting for rate cuts and credit stimulus to bolster demand, but it’s so far failed to motivate buyers.
Why the weak sales? Greater Toronto real estate demand shifted from end-users to investment, with the majority of recently completed homes now investor-owned. This is a trend that carries across most of the province, with Canada’s largest bank previously stating that investors are replacing first-time owners in their portfolio. With 80% of investors losing money on their newly completed rental, they’re running out of leverage (and an investment thesis).
Now priced out, those Millennial buyers are reaching their demographic peak. Those that want a family are now too old to work their way up the housing ladder, and have decided to pick up and leave. Interestingly, this has resulted in Ontario seeing young adults flee for provinces like Alberta—or possibly the country, as the province is now driving a record flight of Canadians to other countries. It’s also probably not a coincidence that Ontario is one of two provinces to see its population shrink.
In short, prices have come down, but not to a point that’s viable for homebuyers. Even if they do come down further, the region’s housing is demanding a premium for a box that’s too small to improve their living conditions. Investors aren’t interested in picking up that slack, especially with the possibility that the condo value has been inflated by blanket appraisals, a practice real estate lawyers are now warning about.
Though what do we know, the industry had a completely different take accompanying the data this month. The head of TRREB suggested this was a result of home invasions, car thefts, and loose bail conditions. Seriously.
“It is important to highlight that housing is not just impacted by economic and financial issues. Canadian residents, both homeowners and renters alike, are increasingly having to deal with the nightmare of violent home invasions and carjackings,” said TRREB CEO John DiMichele.
Further adding, “TRREB is encouraged by the recent federal announcement to table a crime bill this Fall introducing stricter bail conditions and sentencing for these disturbing crimes. While this is a good first step by the federal government to strengthen public safety, more is needed, such as working with provinces to increase law enforcement funding and improve capacity and efficiency in the court system.”
Apparently, rising crime prevents renters from turning into homeowners, despite both being a target. In fact, people are so torn up over the crime they’ve decided to move to cities, and even countries, with higher crime rates.
Historically crime has provided a significant boost for real estate in Greater Toronto. A Transparency International study previously found that Greater Toronto real estate was a haven for billions in anonymous capital. Car thefts are particularly noteworthy, as it was revealed that FINTRAC warned policymakers that the world’s largest car theft group set up shop in Southern Ontario and washes cash with housing, ahead of the surge.