October was a stronger month for sales than most anticipated. Some of this is being put down to the impending mortgage rule changes coming in January. However it is as important as ever to break the market down to see the real picture.
Locally driven segments are the most active. Small condos in the centre of the city are the busiest. Typically that is the engine that drives the rest of the market (ie: small condo seller buys larger condo or townhouse …. larger condo or townhouse seller then buys small house…..small house seller then buys large house…..large house seller then buys large condo). However, due in part to the influence of overseas money on land values in recent years, this cycle has been broken. Condo sellers can’t afford to follow the usual path and stay in the city, so they are either staying in smaller spaces (even with young families) or moving out. As a result all the subsequent links in the chain are being affected.
The only way this chain can be restored is for the gap between condo values and house values to narrow again. This has happened to some extent over the past 12 months (condo values strengthening and house prices softening slightly) and there were signs this month that it may be working. The volume of house sales was up significantly across the city, but it will take a lot more of the same to create a long term solution. The other scenario is that the overseas money, which has stepped away for the past 12 months, returns in force and the two markets function independently of one another.