Real Estate Market stabilizes in Spring
Despite a slow beginning of the real estate market in year 2019, with a comparable year on year sales finishing off the March of 2019, the spring market seems to be stabilizing. As per the TREB report (Toronto Real Estate Board), 7187 houses were sold in the month of March, which brought up the total sales of first quarter of 2019 upto a loss of only -1%.
Region wise average home prices increased by 0.5% to about $788,335 with the City of Toronto experiencing a higher growth of 1.5% and home prices averaging at $830,043. The market showed promise in terms of the valuation of the homes sold, with a rise in benchmark of 2.6%.
So what are the factors that have led to the stabilization of the Spring Market?
Reduced new home listings
There was a year on year fall of 5.1% in new home listings in the Greater Toronto Area, making it a ‘demand in excess and shortage of supply’ situation. According to the data provided by the TREB, the average ‘sales to new listings’ ratio for the market is 51% (with 416 markets at 56% and 905 markets at 49%).
A ration of 51% is nearly indicative of a stabilized spring market. Anything higher or lower than the 40-50% range can be indicative of a buyer or seller’s market. With about half of all new listings getting sold, the spring market is definitely going flat.
Difficulty in lending due to OSFI stress test
According to the TREB report, the national stress test, which impacts the potential home buyers’ ability to get a mortgage and buy a new house, heavily affects the national sales average. With the national OSFI test and the mortgage lending guidelines defining amortization periods for the allowable mortgages that can be insured, the TREB’s president, Garry Bhaura, recommended review of the whole system to give impetus to the real estate market.
Limited options for middle bracket homes
The TREB report also brought to focus the fact that with the influx of more and more condos in the Toronto market, with development friendly zoning, the balance of housing diversity is skewed. The TREB recommended that the government should be focusing on improving the GTA listing by supporting the development of more townhomes than condos.
Although, sales have remained lower in 2019 than they were in the previous couple of years, current market conditions and changing buyer as well as seller priorities are indicating a promising upturn. The Toronto real estate market may be stabilized for spring, but there is definitely an expectation of better sales to new listings ration and improved lending conditions in the remaining year.
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