What Trends Are We Seeing?
The month of August was one underscored by an eerie feeling. Many participants and observers of the real estate market were attempting to determine if the pace of the market was a function of seasonality with standard summer slow downs or a regression in the market indicating a changed pace from that observed in the first two quarters of the year.
What unfolded was that the Toronto Regional Real Estate Board (TRREB) MLS Home Price Index and average prices inched up 2.5 percent and less than one percent respectively, on a year-over-year basis. The TRREB average price of $1,082,496 for August 2023 was higher by less one percent relative to August 2023 and down only 1.6% from July 2023. Overall, the apprehension and eerie feeling that buyers and sellers who participated in the real estate market during August 2023 resulted in the status quo with no big movements in price escalation or drops.
What Lies Ahead?
During the final days of August and first few days of September that eerie feeling changed into one of apprehension as many turned their eyes to the Bank of Canada’s September 6th 2023 rate announcement. As the Bank of Canada decided to hold rates at five percent there was likely a giant sigh of relief from many. With the unemployment rate increasing to 5.5 percent, the job market losing about 6,000 working in August and Gross Domestic Product (GDP) data showing a contraction (0.2 percent) in the second quarter of 2023 many fear that the blunt tool of interest rates which can take up to 18 months to produce results has been used too often since March 2022 to tame inflation. The most recent Bank of Canada rate hikes have been among the most aggressive the Canadian economy has seen, as illustrated below.
A survey done by Maru Public Opinion found that only 33 percent of people hold the belief that the economic outlook will improve over the next 60 days. Negative public sentiment about the economy will impact buyers and sellers alike with many choosing to sit on the sidelines — resulting in the continued headlines of reduced transactions with only those that are truly motivated to act stepping into the real estate market. The Bank of Canada has added fuel to the pessimistic party by foreshadowing future rate increases. This is likely out of fear that the real estate market doesn’t repeat itself with activity like earlier this year when it announced rates would hold. That said, it is challenging to imagine further rate increases given a softening GDP.
Where the buyers are coming from may change as we move forward into Fall 2023 and 2024. Investors (defined as buyers who took out a mortgage to buy another property while maintaining a mortgage on another home) represented 30 percent of home purchases in the first three months of 2023. This is compared to investors only representing 22 percent of purchases in the same period of 2022. While there is much discussion about international students from the media as a new finger is pointed to the “problem” of the real estate market) domestic investors may be welcoming them,. as it is international students’ upward pressure on rents that are saving Canadian homeowners from Bank of Canada’s string of interest rate hikes.
For the remainder of the year we will see more of the same, with prices being flat and limited product for purchasers to select from. We recommend that sellers who are ready for a transition connect with us for a consultation. Depending on your product you may find a surprising benefit. If you are a buyer, consistent and persistent effort to find the right fit for your next move or investment will yield a return over the next few months as we believe that the fundamentally low supply, higher demand due to immigration and domestic desire to own real estate will lead to price escalation sooner than later as it has historically done. So it will be best to purchase while prices remain stable.
What is Happening with Sale Prices
| Sale Price Comparison | ||||
| Product Type | Changes from August 2022 to August 2023 | Changes from July 2023 to August 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -11.2% | -12.2% | -0.36% | -0.42% |
| Semi-Detached | -12.7% | -15.2% | -0.90% | -1.48% |
| Townhouse | 15.6% | -2.9% | -4.73% | 1.53% |
| Condominium | 6.5% | 10.1% | -3.84% | -4.48% |
Number of Transactions Trend
When comparing August 2023 to August 2022, we saw the following trend:
| Categories | August 2023 | August 2022 | Percentage Change |
| Number of Transactions | 5,294 | 5,584 | -5.2% |
| Number of New Listings | 12,296 | 10,478 | 16.2% |
| Number of Active Listings | 15,497 | 13,304 | 16.5% |
When comparing August 2023 to July 2023, we saw the following trend:
| Categories | August 2023 | July 2023 | Percentage Change |
| Number of Transactions | 5,294 | 5,250 | 0.84% |
| Number of New Listings | 12,296 | 13,712 | -10.33% |
| Number of Active Listings | 15,497 | 15,371 | 0.82% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in number of transactions when comparing August 2023 to August 2022 and July 2023. The breakdown per area and product type are as follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from August 2022 to August 2023 | Changes from July 2023 to August 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -12.93% | -2.53% | -0.36% | -0.42% |
| Semi-Detached | -17.86% | 11.19% | -0.90% | -1.48% |
| Townhouse | 18.18% | 4.30% | -4.73% | -1.53% |
| Condominium | 7.21% | 6.71% | -3.84% | -4.48% |
Footnote: Source of statistical data is from the August 2023 and July 2023 Market Watch report of the Toronto Region Real Estate Board (TRREB) MLS.
A – Monthly Percentage Change in the Number of Units Sold
B – Month Over Month Average Price Percentage Change
C – Seasonally Adjusted Month Over Month Average Price Percentage Change
D – Monthly Percentage Change in Average Sale Price
