Friday, January 6, 2012

TREB Predictions for 2012

Toronto City Hall

TREB Review of 2011 and Predictions for 2012

Ontario Real Estate Source

By Brian Madigan LL.B.

The Toronto Real Estate Board just released its most recent Marketwatch, on 5 January 2012.

In essence, it says:

2011 was up 8%

2012 will be up 4%

Now, the prediction for 2012 is all guesswork. Everyone would agree with that. And, rarely would anyone be held responsible for a bad prediction.

But, let’s look at the 8% increase in 2011. It certainly doesn’t work on the January to December numbers. That would be 4.02%. So, if you want a better number, you had better use a different calculation. Have a look at the TREB report in full (below) and note the explanation for the 8%. That only works if you take all of the 2011 numbers, average them, and compare that to the similar average number for 2010.

What is the actual increase (my calculations) if you start with $411,931 at the start of 2010 and end with $451,436 at the end of 2011? It works out to 10.46%. Divide it in two (without annual compounding) and that’s 5.23% per year over that last two years.
Here’s the TREB report:

"Second-Best Year on Record for Sales

Toronto, January 5, 2012— Greater Toronto REALTORS® reported 4,718 transactions through the Toronto MLS® system in December 2011. The December result capped off the second-best year on record under the current Toronto Real Estate Board (TREB) boundaries. Total sales for 2011 amounted to 89,347 – up four per cent in comparison to 2010.

“Low borrowing costs kept Buyers confident in their ability to comfortably cover their mortgage payments along with other major housing costs,” said TREB President Richard Silver.

“If Buyers had not been constrained by a shortage of listings over the past 12 months, we would have been flirting with a new sales record in the Greater Toronto Area,” added Silver.

The average selling price in December was $451,436 – up four per cent compared to December 2010. For all of 2011, the average selling price was $465,412, an increase of eight per cent in comparison to the average of $431,276 in 2010.

“Months of inventory remained below the pre-recession norm in 2011. Very tight market conditions meant substantial competition between Buyers and strong upward pressure on selling prices,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

“TREB’s baseline forecast for 2012 is for an average price of $485,000, representing a more moderate four per cent annual rate of price growth. This baseline view is subject to a heightened degree of risk given the uncertain global economic outlook,” continued Mercer."


Look at the numbers and follow the trends. Prices in the GTA are increasing at about 5% per annum, year after year, and that appears to be continuing.

The ORES Real Estate Index documents that level of return over the last 7 years. Historical data also supports 5% returns in real estate over the longer term.

So, this year’s prediction by TREB at 4%, seems both conservative and realistic.

Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888