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The Most Important Statistic in the Toronto Condo Market

After a couple weeks of relief, the media is once again full of stories of the Toronto condo market’s imminent demise. It seems everyone is talking about the Toronto condo market right now and yet once again there are so many mixed messages it’s hard to know who to believe. A quote from a recent story in the Globe and Mail sums up my feelings on the subject perfectly: “The evidence of a slowdown is primarily anecdotal, not statistical”. Exactly. Everyone is calling for a slowdown but the numbers just don’t support that it’s happening-yet. This could change, and the one number I always keep my eye on when TREB releases their market statistics each month is the SALES:LISTING ratio.

Everyone always likes to quote how many properties were sold compared to the month or year before, and if prices have gone up compared to the month or year before, but these are all trailing indicators. They just tell you what has already happened. Investors in real estate know that if you only know what has already happened you are behind the curve. You need to be able to predict what is going to happen before it happens. Sales to listing ratio (or absorption rate) is a better statistic to follow as it more clearly can show the direction of the market.

In those painful days of early 2009 the ratio went down to around 20%. Prices fell. In those crazy days of mid-late 2009 that number soared to around 80% and prices were rising by 2-3% per month!

I’ve been watching the sales:listing ratio for the downtown condo resale market lately and here is what I’m seeing:

The ratio for May 2012 stands at 38%, versus 33% in May 2011. A drop of 5% points.

There were actually more sales in May 2012 (543) than in May 2011 (531) in the downtown condo market, therefore the drop in the ratio can be attributed to the significant rise in condos available for sale (inventory) in May 2012 (1645) versus a year ago in May 2011 (1388). +257 more condos for sale.

The sales:listing ratio is trending downwards towards Buyer’s market territory (which kicks in officially at 25%). The spring market months of March, April, May looked like this in 2012: 40% -> 37% ->33%.

This alone though is not cause for concern as this is fairly typical of a spring market as sellers come out of the woodwork and listings increase heading into June. In 2011 the numbers for March-April-May were: 49%->40%->38%.

You will notice the numbers for 2012 are all below their 2011 counterparts. It is definitely more of a buyers market in 2012 than it was in 2011, but still not officially in ‘buyer’s market’ territory yet.

Questions or comments? Contact me or leave your contribution below.






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