And how has the high-end market performed, relative to the overall market in Toronto?
Let’s take a look back at the last five years in Toronto, specifically those houses over $3,000,000.
Since the NFL Playoffs are now upon us, and there is no “Sunday Night Football” on NBC, I suppose I’ll spend that 3 1/2 hours sifting through data instead…
Raise your hand if you don’t like Monday mornings?
And raise your hand if you feel less-than-fantastic today?
Well, I have good news for you: it could be worse.
You could be Blair Walsh, the field goal kicker on the Minnesota Vikings who missed a 27-yard field goal to win the game for the Vikings, who were underdogs to the powerhouse Seattle Seahawks.
Sure, those of you that saw the game, and know football well, will point out that the “holder” (yes, that’s a position on a football team…) neglected to rotate the ball so the laces were out, rather than in, and thus he could be blamed moreso for the missed field goal.
But it was twenty-seven yards! Blair Walsh should have been able to make that kick even if the laces reached out and grabbed him, like tentacles on an octopus…
If this sounds familiar, and you’re not a football fan, it’s because Jim Carey dealt with this subject in “Ace Ventura: Pet Detective” over two decades ago:
Remember this clip?
So there you have it.
Today is a good day because you are not Blair Walsh.
Then again, today is not a good day because you’re going to spend the next ten minutes reading about houses you can’t afford…
Last week, the National Post ran an article called, “Forget The $1M Home, The Hottest Part Of The Housing Market Is $4M Plus.”
Well, if “thirty is the new twenty,” as they say about age, then perhaps $4 Million is the new $3 Million.
Until now, it would seem, we have always used $3 Million as the threshold for the “high-end” market. So is this National Post article signifying the changing of the guard? Or is it simply one article, focused on one segment?
The article explains that in Vancouver, sales of $4 Million homes are up 65% year-over-year. But the average home price in Vancouver is a whopping 47% higher than the average home price in Toronto (using November stats from CREA), so perhaps their $4 Million is like our $3 Million. Or something like that…
So today, I want to take a look at statistics for houses in Toronto, selling over $3,000,000, in the last three years.
Now before I begin, I want to make a point about data.
The more you have of it, the truer the conclusions you may draw.
If our sample size is low, then the fluctuations can be massive.
And in Toronto, where you’re looking at 300 houses, at best, there’s going to be fluctuations.
So I’m going to use a number of different metrics in attempt to compare the last three years, and draw conclusions about the $3,000,000 market.
Now before I get to the $3,000,000 market, let’s quickly look at the $2,000,000 market.
Here are the number of homes that sold in Toronto, over $2,000,000, over the last five years, and the respective increases in parenthesis:
2015 – 1,023 (+36%)
2014 – 755 (+43%)
2013 – 529 (+19%)
2012 – 446 (+7%)
2011 – 418
And while we’re at it, and just because I’m damn curious myself, let’s do the same for houses over $1,000,000:
2015 – 5,019 (+29%)
2014 – 3,893 (+31%)
2013 – 2,966 (+12%)
2012 – 2,646 (+15%)
2011 – 2,296
The only strange piece of data I see here is that the increase in $1 Million house sales fell from +15% to +12% in 2013, and in the same year, the increase in $2 Million house sales rose from +7% to +19%.
But again, we’re not dealing with massive sample sizes here, so perhaps there’s no conclusion to be drawn.
In any event, let’s look at the $3,000,000 market.
First, total sales:
2015 – 315 (+74%)
2014 – 181 (+27%)
2013 – 143 (+36%)
2012 – 105 (-9%)
2011 – 115
The increase in total sales from 2014 to 2015 is absolutely shocking.
Recall that the National Post article said sales of $4 Million homes in Vancouver was up 65% in 2015, and the number in Toronto is even more staggering.
There’s a long-standing theory that the higher-priced homes don’t increase in value nearly as much, because there are fewer people buying them.
The market average might tell you one thing, but that average is made up of condos at $250,000, and houses at $11,000,000.
So with that in mind, let’s look at the pricing data.
First, let’s get a refresher on the average Toronto home price over the last five years:
2015 – $622,217 (+9.8%)
2014 – $566,624 (+8.3%)
2013 – $522,958 (+5.2%)
2012 – $497,130 (+6.9%)
2011 – $465,014
Average sale price:
2015 – $4,151,598 (+3.6%)
2014 – $4,007,319 (-4.1%)
2013 – $4,179,533 (+2.6%)
2012 – $4,075,559 (-0.2%)
2011 – $4,083,606
Again, this is the average of as few as 105 properties.
So the sample size might be too small to really get a good picture on the average increase in value of this segment of the market.
If the average home price in Toronto in 2014 increased by 8.3%, I would find it hard to believe that houses over $3,000,000 somehow decreased in value by 4.1%.
Median sale price:
2015 – $3,612,500 (+1.8%)
2014 – $3,550,000 (-2.7%)
2013 – $3,650,000 (-0.9%)
2012 – $3,685,000 (+3.1%)
2011 – $3,575,000
Now we start to see how perhaps a small sample size makes a true picture tough.
The median sale price rose in 2012 by 3.1%, but the average sale price dropped by 0.2%.
The median sale price dropped in 2013 by 0.9%, but the average sale price rose by 2.6%.
2014 and 2015 tell the same story, but in the previous years, the picture gets a bit cloudy.
Of all these numbers, I believe that the “total unit sales” is the one most people would favour, bull or bear.
As I said, the “averages” don’t give us enough clarity on the situation. But you can’t argue with the number of unit sales, and to see the total number of sales of $3,000,000 houses skyrocket by 74% when sales of $1 Million+ and $2 Million+ homes have only increased 29% and 36% respectively is jaw-dropping.
Any ideas as to the “why” in this situation?
I have a few…
1) Price increases
I think it’s fair to say that if prices are increasing, then so too are the number of homes over any given threshold. The average price of a home in Toronto went up 9.8% last year. So, on average, a $2,700,000 house is now worth over $3,000,000.
More properties “join the club” each year, as prices continue to rise.
It takes two to tango.
In order for their to be more sales, there have to be more homes listed for sale.
Many will point to the downsizing of the Baby Boomers as a reason why more high-end homes are hitting the market, and I wouldn’t disagree. But then how do you explain the increase in demand?
The proportion of houses to condos is shrinking massively as our city expands, and houses are becoming more and more rare.
But the “high-end” homes are even more of a rarity.
You can build 500 condos in the sky, any time you’d like. There’s no shortage of sky in Toronto.
Land on the ground is rare, and unless you’re taking a wide, 50-foot bungalow and tearing it down to make two 25-foot detached homes, or building ten townhouses on the site of an old auto garage, we’re seeing very few new homes being built.
But in the “high-end,” were not seeing any new homes being built. There are no “new” homes in Rosedale or Forest Hill, and that has to be driving demand.
4) Foreign Buyers
Yes, I know, we always blame the mysterious “foreign buyer.”
But I have colleagues who specialize in all three of Leaside, Rosedale, and Forest Hill, and all three tell me that they have never seen foreign buyers snapping up homes like they did in 2015.
A $4,000,000 house in Rosedale or Forest Hill might cost $20,000,000 in comparable neighbourhoods in major cities around the world. Perhaps $4 Million is chump change to some folks on the other side of both oceans…
5) Societal Changes
Is it possible that more people with money want to be in areas where there are only people with money?
Is the desire for exclusivity higher in 2016 than it’s ever been?