2011 to be more stable: survey

Home sales in Toronto last year were disproportionately concentrated in the first half of the year, leading to some double-digit price hikes. Buyers rushed to beat anticipated mortgage rate hikes and, according to Royal LePage, many held a widespread misconception that the harmonized sales tax (HST), introduced in July, would be applied to the purchase price of a resale home.

The pace of sales slowed in the latter part of the year and year-over-year price rises were more moderate.

According to the Royal Le-Page House Price Survey and Market Survey Forecast, the average price of a standard two-storey home in Toronto rose 5.6% year-over-year to $594,321. The survey, covering the fourth quarter of 2010, notes that the price of a standard condominium rose 3.8% to $331,525 and the price for a detached bungalow increased 3.1% year-over-year reaching $481,733.

Looking ahead to this year's market, Royal LePage suggests there will be more modest growth in sales and prices.

"Much of that pent-up demand and the irrational exuberance [of the first half of 2010] has been sated," says Phil Soper, president and chief executive of Royal LePage Real Estate Services. "However, we continue to have the artificially low mortgage rates, which will likely cause people to want to get into the market in the earlier part of the year [ahead of expected mortgage rate rises]."

Mr. Soper says that lack of available homes for sale also pushed up prices and made the first half of last year very much a sellers' market.

"There'll be fewer homes sold [in 2011] in Toronto," Mr. Soper says. "Not a lot fewer, but we're projecting 5% fewer. It should be a less frenetic market overall...."

A broker in downtown Toronto says that while there may be more homes available for sale, buyers will still have to compete for that great home in a prime location.

"Ultimately, for the most desirable property in the best areas in central Toronto we are technically in a sellers' market, although we've seen some moderation," says Kevin Somers, broker and area manager with Royal LePage real estate services in Toronto. "For example, a prime property in Forest Hill or Rosedale or even Yonge and Eglinton might have drawn 10 offers in the spring market, but might have only had five or six or even four in the fall."

The expectation is that the Toronto housing market will become more balanced in 2011 but, Mr. Somers says, is unlikely to heavily favour buyers.

"The frenzied nature of the search is not as intense as it was. Buyers are taking a little bit longer to make up their minds and are doing a little bit more diligence," Mr. Somers says. "I would exercise a cautionary note for people to not get too excited about a dramatic shift in the balance in the market between buyers and sellers. It has been a very seller-driven market and a lot of buyers are very eager for change that has manifested itself in a lot of the country. But it might be a fair bit slower to have that happen here in central Toronto. As a result, they could run the risk of missing the boat relative to affordability and the right product for them."

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