A large drop in the rate of GTA home sales in May—20.3% behind the same period in 2016—is being weighed against the positives of a substantial increase in new listings. Market reports in recent months have stressed the impact of low inventory on rapidly inflating home prices and the mounting housing crisis in general, and the newly released figures from the Toronto Real Estate Board (TREB) appear to bolster that narrative.
The 20.3% decline in sales can be further broken down, with a recorded 26.3% drop in detached home sales and a smaller 6.4% drop in condominium apartment sales. In contrast, rebounding from a record low last year, May 2017's supply of listings dramatically rose by 42.9% year-over year, with all housing types experiencing a growth in listings, except for condominium apartments.
Despite this, selling prices continued to be higher in May compared to a year ago, but lower than the previous three months. A prepared statement from TREB President Larry Cerqua stresses that inventory levels are still well below projected demand. "Even with the robust increase in active listings, inventory levels remain low. At the end of May, we had less than two months of inventory. This is why we continued to see very strong annual rates of price growth, albeit lower than the peak growth rates earlier this year.”
While these large fluctuations coincide with the recent creation of the Ontario Fair Housing Plan, a 29% year-over-year rise in the MLS® HPI Composite Benchmark price, and a 14.9% increase in selling prices—now averaging at $863,910—TREB’s Director of Market Analysis Jason Mercer stressed that any “actual, or normalized, effect of the Ontario Fair Housing Plan remains to be seen," continuing to say that "some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out." Mercer attributes the surge in listings to a reaction by homeowners hoping to capitalize on recent price growth.
Meanwhile, the GTA commercial market showed slight signs of stagnation in May. The 377,352 ft² of combined industrial, commercial/retail, and office space leased in May was a 17.1% decline from the 455,463 ft² of leases recorded in the same period the year before. A total of 74 property sales recorded last month marked a slight decrease from the 78 recorded in May 2016. While the average selling price did increase year-over-year, this is being attributed to the sizes and locations of the properties rather than market conditions.
Fluctuations were recorded for average lease rates in all market segments. Among these, a substantial increase in average commercial/retail and office rates that is being credited to an increase of smaller spaces, which tend to lease at higher rates per square foot. The significantly larger industrial market segment's average lease rate dropped 6.2% from May 2016's figure to $5.59 per square foot.
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