Toronto Real Estate Market Update - November 2018

Have you seen the numbers for November's Toronto real estate market?

Here's a few things that I want to talk to you about. Sales were down 14.7% in November 2018, relative to November 2017. It looks like 2018 will be the lowest, or it is the second lowest, totaled sales in the past 12 years. The lowest one was 2008, which was the credit cruncher. That's a big change, based on what's been happening for the last few years with Toronto's real estate market.

The second thing I want to talk to you about is, we have to break it down because again, if you look at Markham, it's a different real estate market, compared to Burlington, to Richmond Hill, to the City of Toronto. Here's what happened in the City of Toronto for the month of November 2018. Condos were up 7%, at an average price of $595,000. This is in the 416. Semi-detached were up 17.2%, at $1.06 million, and then detached at $1.3 million, up by 1.8% from November 2017.

It's important to understand the overall market, so yes, the overall Greater Toronto Area is down 14.7%, but again, you have to break it down, because real estate is local and you can see the City of Toronto is still active. There is price appreciation in different sectors. And you can see there is a difference between the condos, the semi-detached and the detached, and that is driven by all the new mortgage rules, the stress test, and the higher interest rates.

What's interesting, moving forward, is the impact of lower sales on government budgets, because as you know, especially in the City of Toronto, we have two land transfer taxes. One to the city itself and the other one is to the province. As sales numbers have come down to the second lowest in 12 years, it will be interesting to see how the City of Toronto, as well as the province of Ontario, would respond, because the land transfer tax generates a lot of money for them. I'm sure you hear all the budget talks. There's always these big deficits. There's a budget shortfall and they need the money, so it will be interesting to see where and how they make up that shortfall, through additional user fees, increase in other type of taxes. It could be property taxes. It could be water rates. It could be many different forms. It'll be interesting to see how the city, as well as the province responds to lower revenues that have come in in 2018, through the land transfer tax system.

The one thing to take into account is this year, we've had a lot of changes. It's been about a year and a half after the Fair Housing Plan, which kicked in in April 2017. The Mortgage Stress Test Rule kicked in in the new year. Interest rates have gone up five times in the last year and a half, which is the prime rate. All that stuff has impacted the sales activities in the Greater Toronto real estate market. Now, what's interesting is, looking at it at at macro level, immigration. Canada averages about 300,000 a year, of which about 100,000 come to the GTA. Not Toronto, but the Greater Toronto Area.

If you look at from 2008 til today, 2018, that's a million more people in the Greater Toronto Area. It will be interesting to see how that population growth will impact the real estate market moving forward, because if this year has dropped to the second lowest level in the past 12 years, what will happen moving forward in 2019 and 2020? Will the additional population have built enough savings to qualify? Would they be able to qualify with all these new mortgage rules? And again, we'll see what happens with the economy, because there are signs of economic slowdown out of the US, which Canada's tied to.

At the same time, in Canada, we have our own economic issues. Oshawa, there was that big announcement with GM shutting down the plant. 2500 layoffs at the end of December 2019, which is a significant number of families losing their jobs and also, we have to take into account it's not just the 2500, which is a large number of families. But it's the ripple effect, so all those jobs which support the Oshawa plant. You have the suppliers, the tier ones and the tier twos and the tier threes, but also the service industries that are around the GM Oshawa plant, such as restaurants, plumbers, shops and restaurants and all that kind of stuff that will be directly impacted by those layoffs.

On the other hand, on the west coast, in western Canada, we've had the oil prices collapse. That's presented economic pressures for Alberta and I personally believe that The Bank of Canada will hold back next year, because things are not looking good in Alberta. Then you have the upcoming layoffs in Ontario. I believe The Bank of Canada will sit on the sidelines.

It will be interesting to see how things work out in 2019, with respect to interest rates, number one, and then these buyers that have been pushed to the sidelines, if they will come back in 2019.