What Trends Are We Seeing?
There has been a moderation in activity in the Toronto and Greater Toronto Area (GTA) housing market over the month of June 2023. Since the Bank of Canada rate increase in June 2023 it has resulted in a market that is still competitive, however, less competitive than seen in the start of 2023. The reduction in competition is likely a function of two things i) uncertainty of rates which produces a confidence crisis for buyers and ii) lack of quality product for buyers to choose from (cannot buy what doesn’t exist). What we are seeing is that in circumstances where sellers were expecting high sale prices and/or multiple offers it is not occurring at the outset of the listing process. However, with re-lists and different pricing strategies sellers are still accomplishing their goals because of the abundance of buyers and lack of options for buyers to select from. It should be noted that the source of the adjustment to activity from the front half of the year is hard to distinguish between i) an adjusted market and ii) standard seasonal lulls for June, July and August which are traditionally slower months from a sales activity perspective.
Prices continue to hold steady with modest reductions to the average and median prices of homes sold on the Toronto Regional Real Estate Board (TRREB) to $1,182,120 and $1,010,000 respectively.
Despite higher interest rates that have been seen over an extended period in Canada, the housing market continues to be robust. Driving these factors have been a hot employment market and the fact that the country’s population rose by 1.2 million from March 2022 to March 31, 2023.
What Lies Ahead?
With the most recent (July 12 2023) 25-basis point increase in the interest rate bringing the prime rate to 5 per cent we expect to see the following i) a small flurry of activity as buyers with rate holds rush out to purchase and ii) a more balanced real estate market through the back end of 2023. The Bank of Canada is being prudent to signal potential additional rate increases for the remainder of the year. This may be to impact the psychology of the economy given that when they signaled a rate hold in January 2023 and thus provided certainty to the market, it resulted in robust consumption and exacerbated inflation figures with a rebounding housing market.
The potential that the Office of the Superintendent of Financial Institutions (OSFI) may be requiring banks to hold more capital against certain mortgages where homeowner payments fail to cover even the interest and the loan balance is greater than 65 per cent of the value of the property may impact the sell or stay decision for certain sellers. Although the proposal would not impact existing mortgages in place, it would likely impact certain homeowners at renewal and potentially result in some sellers deciding to capitalize on the equity in their assets now rather than face arduous cash flows in the near future. This could positively impact supply.
Historically, what we have noted is that it takes between 60 to 120 days for the housing market to adjust to new norms: whether it be regulations, interest rates and/or consumer behaviour. It seems that the expectations of a slower start to 2023 and a gradual rise in the back half of the year has been reversed. Keep in mind, prices are still holding and buyers have been conditioned to realize that during a lull of price escalation, it may be prudent to act, given that when the lull is over prices tend to increase at a more aggressive rate than the benefit of waiting for a drop in the market.
What is Happening with Sale Prices
Average sale price for all property types for the month of June increased by 3.2% year-over-year to $1,182,120 in June 2023 from $1,145,796 in June 2022. Month-over-month we saw a 1.15 % decrease May 2023 to June 2023. On TRREB, for Toronto and the GTA, when broken down by product type and comparing June 2022 to June 2023 and May 2023 to June 2023, the average sale prices changes are as follows:
| Sale Price Comparison | ||||
| Product Type | Changes from June 2022 to June 2023 | Changes from May 2023 to June 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | 2.6% | 6.6% | -6.69% | 0.48% |
| Semi-Detached | 4.9% | 7.8% | 0.70% | -1.91% |
| Townhouse | 0.7% | 6.4% | –3.28% | -2.35% |
| Condominium | -0.2% | -2.7% | -1.85% | -0.53% |
Number of Transactions Trend
When comparing June 2023 to June 2022, we saw the following trend:
| Categories | June 2023 | June 2022 | Percentage Change |
| Number of Transactions | 7,481 | 6,422 | 16.5% |
| Number of New Listings | 15,865 | 16,353 | -3.0% |
| Number of Active Listings | 14,107 | 16,087 | -12.3% |
When comparing June 2023 to May 2023, we saw the following trend:
| Categories | Jun 2023 | May 2023 | Percentage Change |
| Number of Transactions | 7,481 | 9,012 | -16.9% |
| Number of New Listings | 15,865 | 15,194 | 4.42% |
| Number of Active Listings | 4,107 | 11,868 | -65.39% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in number of transactions when comparing June 2023 to June 2022 and May 2023. The breakdown per area and product type are as follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from June 2022 to June 2023 | Changes from May 2023 to June 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | 9.2% | 14.6% | -16.80% | -16.53% |
| Semi-Detached | 21.6% | -1.6% | 4.20% | -24.15% |
| Townhouse | 12.0% | 13.4% | -11.73% | -20.95% |
| Condominium | 24.1% | 34.3% | -15.17% | -21.62% |
Footnote: Source of statistical data is from the June 2023 and May 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
