In January median sale prices ticked up from December in 5 of the 6 local markets I track. Median days on the market were a draw – 3 upticks, 3 downticks in a rising trend. An addition this month is 1 bedroom vs. 2 bedroom condos, using the hot downtown lakefront area as a proxy for the condo market.
The weakest area among the six continues to be Markham/Richmond Hill condos along Highway 7. Not only is the sold price downtrend most pronounced, but fewer than 10 properties were sold in 4 of the last 5 months. The number of buildings under construction could make this area #1 in the GTA for the feared glut of unsold or unrented condos. Its main competitor for the title could be the super-luxury condos downtown, such as Trump Tower where buyers are trying to bail out, and Shangri-La where appraisals are said to be well-below pre-construction prices (see link: How Toronto’s housing market is actually going to suffer).
I had suspected that 1 bedroom condos were not doing as well as 2 bedroom units. Turns out the two are trending about the same, except for quick sales of 1 bedrooms last month (prices still flat).
The headwinds of sky-high household debt and world-record housing price-to-rent ratio are unabated. The growth rate of debt is slowing but continues to exceed income growth. Household debt levels remain at the world record 165% of household income.
Canada currently tops the global chart with the ‘biggest housing bubble in the world’. Our price-to-rent ratio suggests housing is overvalued by 78%. Second-place Hong Kong trails at 69%. Against household income, Canada’s overvaluation comes in at 34%, second only to France at 35%. Matthew O'Brien of The Atlantic points out a common factor in pricey housing markets around the world – the “exit strategy” of rich Chinese.
Lenders, brokerages, and developers are holding fast to the soft-landing scenario that our Finance Minister and Bank of Canada Governor have been trying to engineer. The tighter mortgage rules that realtors protest might be the very thing saving us from going off a housing cliff. The hoped-for scenario is a slow down-drift in prices while incomes and the overall economy slowly rise. A few years of mellowness instead of craziness would bring down our record-high ratios.
Advice for buyers and sellers
The broad consensus appears to be this – housing averages are not likely to rise, but within that average there will be winners and losers. If your selling timeframe is this year or next, condo owners are at greater risk than house owners. If your buying timeframe is this year or next, condo buyers have more to choose from than house buyers.
Except for particular hot areas and hot buildings, property owners looking to increase their net worth over the next year or two might find better opportunities in the stock market than in the real estate market. Over the past many years your net worth went up while you went about your business, whether working or retired. For the majority, those days could be over for a while.
Condo buyers – the incentives are out there and the deals are emerging.
House buyers – if selling to buy, do the math. See what’s out there, get a market valuation on your property, and weigh the disposable income you enjoy against the trade-up cost you’ll pay. If renting, consider Canada’s world-record 78% overvaluation of housing price vs rent. It means renting is a screaming bargain. That might not make you feel better but at least the math is on your side.
For all readers – when you’re ready to take action, get more information, or just talk things over, you know how to reach me.
Real Estate Sales Representative
call or text: 416 436-5851
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