I hope everyone is enjoying the summer so far. In the past couple of weeks the market has appeared to cool down somewhat. This cool down is common and usually occurs around this time every year. 9,422 home sales were reported through the TorontoMLS system in June 2012. The number of transactions was down by 5.4 per cent in comparison to June 2011. The year-over-year decline was largest in the City of Toronto, where sales were down by 13 per cent compared to June 2011. Sales in the rest of the Toronto Real Estate Board (TREB) market area were comparable to a year ago.
Buyers continue to face the substantial upfront cost associated with the City of Toronto’s unfair Land Transfer Tax. Recent polling by TREB suggests that many households are considering home purchases outside of the City of Toronto to avoid paying the Land Transfer Tax. This goes a long way in explaining the disproportionate decline in sales in the City versus surrounding regions.
The average selling price in June was $508,622 – up by 7.3 per cent compared to June 2011. The mortgage payment associated with the average priced home in June, assuming five per cent down and a five-year fixed rate mortgage amortized over 25 years, would account for approximately 35 per cent of the average household’s income in the GTA after adding property tax and utility payments.
According to new mortgage lending guidelines set out by Finance Minister Jim Flaherty, the GTA housing market remains affordable. The share of the average household’s income going toward major home ownership payments for the average priced home remains below the 39 per cent ceiling recently announced by Mr. Flaherty.
The average household in the GTA continues to benefit from a considerable amount of flexibility to account for higher interest rates moving forward. I expect for the market to be a more balanced market in the second half of the year which will make it a better buying environment for buyers. With new listings increasing there will be more selection for buyers and pressure on sellers to be priced well. The low interest rates and better supply will make it an ideal buying time and I expect buyers and investors will take advantage of this.