Year in Review
Well, that was certainly quite different than what we experienced in 2017. With the introduction of the Fair Housing Plan in April 2017 and the new mortgage stress test later in the year, 2018 saw a marked drop in the number of sales in the freehold market. However, we didn’t quite see the pullback in prices that many anticipated.
In fact, towards the latter half of the year prices were up in all segments year over year with the robust condo market leading the way.
The Never-Ending Condo Market
Without a doubt, the engine that drove the market last year was the condo market. With prices staying relatively stable (and unaffordable for most) buyers continued to focus on condos as an affordable long-term option.
But, it wasn’t just affordability that had buyers moving to condos. There has definitely been a shift BACK to city centres and back to downtown – and not just from buyers but also from large corporations.
Tim Hortons & Microsoft both moved to the downtown core as companies battle for talent in Toronto. The effects of the Toronto condo market then spill over to the 905 where a city like Mississauga has been nicely poised to continue to reinvent their downtown core with new builds and a dedicated LRT system coming up in 2021.
In the first half of the year, insane multiple offers were the norm. In May, I sold a property that received SIXTEEN (16) offers. And, no, it was not severely underpriced.
Prices shot up again, but the summer cooled things down and stayed that way in the 2nd half of the year. Multiple offers still happened, but buyers became more selective at the new prices. And, really, that’s the story for the freehold market as well.
The Freehold Market
With prices falling 15%-20% from the previous year, we headed into unchartered territory in 2018. The new mortgage stress test rules saw a mad scramble of purchases in late 2017, so the beginning of the year was expected to be rather slow.
What ended up happening was a severe drop in the number of sales but prices didn’t follow suit. But why?
The Have and Have-Not Listings
With the wind taken out of the sails of the market, a normalcy returned where buyers now felt they could do proper due diligence on a property before purchasing. Gone were the days where anyone could throw their home up on the market in any condition and at any price and simply wait for the offers to roll in.
Sellers didn’t quite get the message right away and it created two categories of listings: The well-updated, clean home with nice photography and videography that was properly marketed versus the blurry, dark iPhone pictures where one of them is a cat in a bedroom.
Needless to say the latter home was not updated and the sellers didn’t have a realistic price in mind. They were still of the mindset that it was 2017 and they deserved that price for their home because they had simply existed in it.
Unfortunately, it takes more than that to sell a home and buyers made that clear. That meant that buyers flocked to well-priced homes that showed well. These homes sold very quickly and often in multiple offers while the others sat on the market until they either drastically reduced their price or the listing was cancelled.
While those not in the market read the media headlines where sales were low, the market had cooled and prices were flat, those in the market knew the truth. That if you wanted that nice, well-priced home you better come prepared because it will be gone in a couple of days.
So, How Did We End 2018?
- Prices Are FLAT (but it depends on the month and sector)
Unless you’re looking for a home under a million. Condos, towns and semis led price growth while detached homes above a million were relatively flat outside of a nice bump in November which could be telling of where we’re headed in the new year.
- Sales Are Down, Listings are Down
As alluded to above, while sales and listings are down we’re still not in a buyer’s market when it comes to really attractive, well-priced homes. With listings down so much, so is the amount of available options for hungry, modern buyers who are not looking to take on projects. That has helped keep prices from cratering even further as the homes that do sell are still selling for a healthy amount.
- Average Days on Market are UP & Inventory is Flat
The fly-by-night agents with their terrible iPhone photos cannot just stick the place up on MLS and cross their fingers for a sale $150K over asking. Those days are gone. We’re now back to a point where you shouldn’t expect your home to sell in a weekend. However, that’s not to say that with the right pricing, marketing and experience that you can’t still sell your home quickly. It’s just going to take a little more work and patience than before.
Don’t let the December numbers fool you. Because of the new mortgage stress-test that was set to start in January 2018, December saw a huge increase in buyers looking to purchase and close before the rules kicked in.
Instead, if you look at the Fall numbers as a total you’ll see a pattern much closer to the analysis I posted above. The condo market certainly was the most robust and drove a huge part of the growth in Mississauga while detached homes above a million suffered the most.
3 Predictions for Mississauga Real Estate Market in 2019
1) Prices will go up again…but only slightly
With the uncertainty around the economy over the next couple of years, most people I speak with are more concerned than ever about an impending recession. I like to hark back to 2008-2009 when we went through a similar uneasiness about the future…and we all know how that turned out.
In terms of condo investment, Toronto (and Mississauga and the outlying communities) are seeing rental rates soar as the city struggles to keep up with demand. Imagine that headline back in 2011 when every armchair expert guaranteed thousands upon thousands of empty units collecting dust in the skyscraper ghetto that Toronto would become?
Instead, we’ve seen unprecedented growth in Toronto. Large corporations – especially the tech community – are investing in the city because they understand that local and foreign talent want to be in the city. We’ve certainly come to a point of no return where Toronto has become a city of renters for millenials and beyond.
With the Federal government’s mandate to increase immigration, we’re going to see even more demand thrust onto Toronto and the 905. This all points to continued growth in the future even if there is a worldwide recession in the short term. As real estate is a long-term game, I personally wouldn’t keep waiting for that pullback as you could get left in the dust like many were over the last decade.
For this year, I’m forecasting more of the same that we saw in 2018. I think listings will continue to be hard to come by and prices will grow moderately by 3-4% overall but with most gains coming in the non-detached sectors again.
2) No more new mortgage rules
I continue to believe the government feels they’ve done enough on this side of the coin to ensure people can afford the mortgages they’re taking out. It’s harder than ever to qualify for one and if you can then you’ve passed a pretty stern test with mortgage rates in the high 3s and having to qualify 2 points above that.
3) Interest rates will fall slightly
Despite everyone thinking that mortgage rates would continue to rise, the Bank of Canada did the unexpected and the cut the overnight rate this quarter. I believe another cut will come this year and we will finish 2019 with a lower 5-year fixed rate than now.
With the uncertainty in the world markets, I think the BoC is going to be very, very careful this year. And I think at one point they’re going to cut the rates again to spur activity and push any potential problems towards 2020. It’ll essentially be a slight easing of the mortgage stress test as we head into election season in October with the aim to increase that rate going into the new year.
The Wrap Up
2018 was an interesting year in its own way. I think that we got pretty much what we expected out of it except on the condo side where things continued to defy expectations. I believe the growth will be more moderate on that side of things in 2019, but anyone waiting for the market to crash is going to continue waiting.
For sellers, it’s extremely important that if you plan to sell you must price your home correctly. That means listening to your real estate professional. Your job is to get the home in great shape, help show it well, be extremely flexible with showings and choose your agent wisely (hopefully you have a good one – if you don’t my contact info is below and all over this site).
Photo credit to – Christian Schnettelker – www.manoftaste.de