Residential: Did Prices Recover Their Lost Ground Since Last Peak?
Zeppelin Real Estate Analysis Limited
simple answer is
a yes but.
First, not all neighborhoods have recovered in prices (and beyond) but most
have. Second, the rates of recovery differ from neighborhood to
neighborhood. To recap, and as with some markets in the USA, Toronto had had
a very hot (residential) real estate market back in around the late 1980s
and then it sank. The bottom occurred sometime during the early part of
1990s. Unlike some markets in the USA, Toronto overall has had a slower
recovery in terms of prices. Here we are curious to know how each
neighborhood has done in terms of whether the current prices have (more
than) recovered the ground lost during the last recession in the late 80s
and early 90s. We have searched for some published data and information and
we intend to share some of the findings with readers:
= these come from sources such as the Toronto Real Estate Board (TREB) and
other websites, and as such, probably most have to do with the secondary
transactions i.e. sales and purchases between individual vendors and
buyers. Also, the figures used are roughed to the closest C$5,000 and are
either average or median prices, thus there could be a certain degree of
skew. Also, no allowances have been made for the fluctuations in /
exchange rates of the Canadian dollars i.e. the prices used are nominal and
have not been adjusted. The real estate districts / neighborhoods as divided
by TREB are adopted here as well, and please note there is a possibility
that certain price changes may be due more to a particular type of house
form e.g. detached, semi-detached, townhouse, high-rise condominium etc
becoming more dominant than to an actual price rise or drop. Also,
the peaks and bottoms may not synchronize exactly in time.
Rise More Does Not Hold True
= some investors may be tempted to think that the more acute the drop in
prices, the more acute they will spike up again. This does not seem to be
the case as the correlation between the % drop and rise is weak.
Does Enhance the Chance to Exceed the Previous Peak
= using median figures, there does seem to be some link between a higher
price rise and its chance to exceed the earlier peak price level. But then
again, just some link but not a very strong one.
Pricey Neighborhoods Tend to be Pricey Still
(but not always) = especially when one looks at the average last peak, last
bottom, and current prices, though by no means do neighborhoods remain
static all the time in their previous price categories. The latter seems to
apply to new neighborhoods in particular, some of which seem to have risen
above the crowd.
Pricier Neighborhoods Tend to Drop A Bit More in terms of %
= there is
a relatively significant correlation that the pricier the homes in a
neighborhood, the higher the % drop they are likely to have. Perhaps this
reflects the fact that good neighborhoods tend to be sought after even more
in good times thus further contributing to a higher than typical rise that
in turn leads to a higher than typical drop in subsequent adjustments.
Median Prices Synchronize Well
for a few cases maybe, the average and median prices correlate quite
positively i.e. it seems the data contains few cases if any where an
exceptionally high (or low) priced transaction exerts influence that is out
based on the average / median prices during the peak, bottom, and current
periods, one may have the following
(district-neighborhood codes are those of TREB):
and Neighborhoods That Have NOT Reached Their Previous Peaks
& See Major Differences Still = E21 (Scugog), C14 (around Yonge & Sheppard),
and W17 (Mississauga). Please note this in itself does not necessarily imply
a lack of price recovery, as it may be due to the emerging dominance /
increased popularity of a particular house-form formerly less seen between
the last peak and current periods, or just that coincidentally a certain
price range being transacted more in the period.
and Neighborhoods That Have Seen Significant Increases
Between the Last Peak and Current Periods = N13 (around Davis Drive), W13
(West of Credit River), and W25 (Burlington). Likewise, the note that
applies to (1) above applies here as well.
Traditional Districts and Neighborhoods Keep To Their Usual Self,
in particular those traditional well-off ones with the highest average or
median home prices around = for instance, C3 / C4 (North and South of
Eglinton Avenue), C9 / C10 (Bayview), and C12 (the prominent Bridle Path
Area). The point is traditional prominent / well-off neighborhoods are not
easily replaced or substituted, and will still be pricey despite the
formation of similar neighborhoods in newer areas.
investors, one may note that districts-neighborhoods that have not recovered
in any significant way or have the higher price rises are
relatively newer areas,
thus conforming to a hypothesis that such (less proven) areas give a higher
return possibility albeit for a higher level of risk too.
may wish to go for the more steady traditional areas.
the Toronto market has recovered the lost ground
via having a current average price of C$290,000 versus the last peak level
in 1989 of C$275,000, between which there had been a bottom level of
C$195,000 during the 1990s.
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