Week 124: Rentals will save Urban Toronto and surrounding area house prices.

I had an extremely rude agent tell me that my listing was overpriced this week. It’s a commercial, residential property on Gerrard. We had it sold, but the buyer let the deal go after wasting our time for two weeks. But the moment it went back on the market, we had three showings booked, and an offer is coming again today.

(oh, and please subscribe to my new YouTube Channel here, where I go over all of these reports in more detail)

This rude agent told me that “they expected a much better property for the price” and that being across from a pot shop was a massive detriment (there’s also an LCBO there – weird). I should drop the price by $200K, she said.

If I drop the price by $200K, this would create an 8% cap rate property between two of the most resilient and in-demand communities in all of Toronto; Leslieville & North Riverdale. I’d be sold in a nanosecond, but my Seller clients would be out a min of $200K.

This agent clearly doesn’t understand cap rates or even today’s market. But they made an effort to tell me they’ve been “selling in the area for 30 years” funny;
I don’t recognize their name. We’ve outsold them for the past ten years in the area.

But I digress.

The demand for rentals has never been as strong as today. (continued below chart)

Urban Markets: Downtown & Surrounding Areas
House Average Price: $1,457,702
House Median Price: $1,395,000
564 Active Listings
49 Firm Sales This Week
Months of Inventory (MoI) ~ 1.77
Average Days on Market ~ 12,33

Condo Average Price: $852,472
Condo Median Price: $757,500
1810 Active Listings
86 Firm Sales This Week
MoI ~ 2.16
Average Days on Market (DOM) ~ 22.08

Not a single quality rental is sitting on the market for longer than 24hrs right now. It’s not because we’re outstanding agents that just can’t keep a property on the shelf – although agents do love to take unearned credit when the market’s hot, dont they?

Many houses are less expensive today than in January and February this year. Maybe even March. That’s an indisputable fact.

However, we’ve had four weeks of either flat or decreasing supply for both houses and condos.

This is primarily attributable to the typical summer slowdown.

But do you think property owners would be as calm in the summer if they’re as panicked as some truthtellers online will lead you to believe?

The articles, the ticktocks, the Twitter updates. With graphs and “I told you so,” pretending that daytrader mentality and strategies somehow make sense in the residential real estate world. (continued below chart)

Urban North: Rosedale, Deer Park, Moore Park, Forest Hill, & Lawrence Park
House Average Price: $3,026,643
House Median Price: $3,300,000
140 Active Listings
7 Firm Sales This Week
MoI ~ 2.30
Average Days on Market ~ 19.71

Condo Average Price: $1,372,533
Condo Median Price: $942,800
207 Active Listings
9 Firm Sales This Week
MoI ~ 2.43
Average Days on Market ~ 25.11

When looking at data, please understand how broad the data set is.

How large an area is the study, article, blog, TikTok etc – talking about? Are they talking GTA? Are they talking about all of the 416?

Or have they taken the time to drill down and extract the critical information from specific Toronto communities?

We have. For 124 weeks in a row now.

Weekly data pulled from specific communities may tell a different tale vs. cookie-cutter generalized info that sounds good in a headline but is meaningless to where most of our clients live, work and play.

Our urban markets are very well supplied but still statistically in Seller’s market territory when looking at the Months of Inventory statistics. We’re under two months of supply in most areas, with some just over.

So we’ll be fine if we don’t have a flood of new listings hitting the market ahead/after each interest rate announcement. In the markets we’re watching anyway. (continued below chart)

Leaside, Davisville, Yonge & Eglinton
House Average Price: $2,100,000
House Median Price: $2,000,000
51 Active Listings
3 Firm Sales This Week
Months of Inventory (MoI) ~ 1.46
Average Days on Market ~ 29

Condo Average Price: $772,250
Condo Median Price: $743,500
186 Active Listings
12 Firm Sales This Week
MoI ~ 2.53
Average Days on Market ~ 22,33

We’re still actively working with buyers with rate holds that need to make purchases this month. And there will be the same scenario after the following announcement and the next. Today, some say there will be a 0.5% hike in Sept. But as we now know, these forecasts are complete BS. Until we hear it from the horse’s mouth, nobody knows.

But you know what’s very interesting about this market?

Rentals.

Rentals will save Urban Toronto and surrounding area house prices as we get into this recession.

Am I saying all residential properties will be sold with Cap Rates being the primary value metric? Of course not, but there are way more Mom & Pop investors in Toronto than you’d think.

A ton of condos and houses are bought by local investors who won’t be able to look away from the juicy rental prices and maybe even get that cash-flowing unicorn that’s been incredibly elusive over the past few years. (continued below chart)

Birch Cliff
House Average Price: $1,353,200
House Median Price: $1,300,000
29 Active Listings
5 Firm Sales This Week
Months of Inventory (MoI) ~ 1.50
Average Days on Market ~ 9.4

Speaking of rentals, did you see the article about Abi Bond, housing secretariat executive director, saying she’s going to recommend capping rental increases IN BETWEEN TENANTS? Says the woman who had a 20% pay raise during covid, earning more than $200k/yr…maybe we should cap politician and city staff raises too?

Perhaps we should just limit the gas taxes? What else should be capped? Silly noise from the city will only restrict rental supply and cause long-term damage.

Landlords already have difficulty navigating the LTB without completely losing everything as Tenants take advantage of the system.

We have this incredible property on Rhodes. Great detached property with potential for excellent cash flow. We’d never consider marketing a property like this to an investor. Still, now that the rental market is full of so many potential tenants, an investor could buy this property at a discount today, rent it for the maximum, and take advantage of the price jump in 18-24 months when the market bounces back. (continued below chart)

Kingston Rd Corridor to Highland Creek
House Average Price: $1,283,371
House Median Price: $1,075,000
96 Active Listings
7 Firm Sales This Week
Months of Inventory (MoI) ~ 1.82
Average Days on Market ~ 17.67

Condo Average Price: $467,000
Condo Median Price: $467,000
60 Active Listings
2 Firm Sales This Week
MoI ~ 2.05
Average Days on Market ~ 14DoM

I’ll leave you with some parting advice today.

If you’re a Buyer, make sure you’re not maxing out on your buy. Daily goods are becoming more expensive, and we’ll be in a recession in 12 months.

The good news there is there’s usually downward pressure on interest rates during a recession. But from now until then, there will be more increases.

Sellers, remember when Covid first happened, and you didn’t know how real estate would react? You held firm, and look at you today.

If you don’t need to sell, please don’t. The market doesn’t need you testing the market. You need to enjoy your summer, knowing your investment will be fine.

Sit back and let the others try and day trade real estate while you enjoy your fantastic home.

This is what’s happening now with four weeks of either flat or declining supply. Like I said last week, there will be a better market for you to sell down the road, but now’s not the time.

If you have something special, let’s talk because buyers are still looking for flawless properties to make their forever home.

Have a terrific Tuesday, and I’ll see you next week 🙂

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That’s all for today; thanks so much for your energy and attention. If you want some clarity on the market and your specific situation, please DM, comment below or email Ara@thespringteam.ca.

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