What trends are we seeing?

A more balanced market has begun to evolve in the Toronto and Greater Toronto (GTA) area. It is important to understand what this may mean for buyers and sellers. On a more immediate basis this may mean being more patient on both the purchase and seller side of the equation. Seller expectations to receive sale prices which substantially exceeded prior sales is slower to dissipate. From a buyer’s perspective, the opportunity to pay in alignment with the prior sale exists. Understanding from a buyer and seller perspective that this does not necessarily mean lack of interest from either side to produce transactions as we continue to notice competitive bidding situations. The difference from the frenzied market noted earlier this year is that instead of 15 buyers bidding on a property there may be two to four. A competitive situation exists, buyers paying the top dollar they believe the property is worth; however, generally not exceeding prior sale prices by notable amounts.

Interestingly, on the rental side of things, both for Toronto and the GTA, we are seeing high competition with properties leasing quickly, in multiple offers and above what most recent leased prices would dictate. This can have an impact on prospective sellers who have the option of renting their assets or selling and for prospective investors who may feel comforted that there will be a strong contingency of prospective tenants to choose from.

What lies ahead for 2022?

The term “polycrisis” will likely become more common over the upcoming months. The challenge with multiple crisis occurring at the same time is the tools to control or mediate the results of the crisis that can have multiple impacts. In some instances, said tools will be supporting recovery from crisis and in others exacerbating it. Utilizing increasing interest rates to combat inflation as a general principle is effective. However, much concern exists in the current market that the cause of inflation being supply shortages and the war in the Ukraine will simply result in the blunt tool of interest rates not having an impact on inflation and simply result in economic breakdown of interest rate sensitive sections of the economy with the real estate industry included.

Within Toronto and the GTA the fundamentals of demand and supply will likely prevail over the medium term. With expected immigration by 2024 into the Toronto and GTA area of 600,000 and existing supply shortages the shift from buyers (should we see it), to balance to a sellers’ market will likely happen quickly. Social mobility for those abroad who are looking to create permanent residences in the Toronto and GTA area will likely support a shorter versus longer term period out of seller’s market territory. The increased push towards density and increased supply will take time to truly impact supply and demand factors. We caution buyers looking for end-use product with respect to the time one holds off on a purchase as it is not possible to predict the timing at which a low has been reached from a price perspective; at that point, you are usually in an escalating market again.

The decision to sell or purchase is one that is impacted by a variety of factors, customized to an individual’s objectives and position. We recommend ongoing evaluation and communication with your realtor about the real estate market to allow for an integration of what is being read in publications to what is occurring in the actual market on a more immediate basis as often that the published perspective comes after the active realtor experience can be shared.

Reviewing What is Happening with Sale Prices

The average sale price for all property types was up by 9.4% year-over-year to $1,212,806 from May 2021 to May 2022. There was a slight decrease month over month by 3.32% when compared to April 2022’s $1,254,436. On the Toronto Regional Real Estate Board (TRREB), for Toronto and the GTA, when breaking down by product type and comparing May 2022 to May 2021, and April 2022 to May 2022, the average sale prices changes are as follows:

Sale Price Comparison
Product Type Changes from May 2021 to May 2022 Changes from April 2022 to May 2022
Toronto GTA Toronto GTA
Detached +11.5% +7.8% -1.70% -6.15%
Semi-Detached +7.5% +14.1% -4.57% -5.92%
Townhouse +10.4% +13.8% -3.78% -3.90%
Condominium +10.5% +19.7% -3.38% -6.45%

It is important to recognize that we are coming from a period of unusually high sale prices in January, February and March so it can be expected that the month over month average price declines nominally as there is less pressure on buyers to exceed market expectations in competitive bid situations.

Number of Transactions Trend

May 2022 continued the trend of a cooling market from the effects of rising interest rates, the expected slow down was affected by the provincial election and continued social mobility limitations (although alleviated a bit since the height of COVID). TRREB reports the number of transactions in May 2022 were down by 38.8% compared to May 2021 and down by 9.05% compared to April 2022.

When comparing May 2022 to May 2021, we saw the following trend:

Categories May 2022 May 2021 Percentage Change
Number of Transactions 7,283 11,903 -38.8%
Number of New Listings 18,679 18,593 -0.5%
Number of Active Listings 15,433 12,247 26.0%

When comparing May 2022 to April 2022, we saw the following trend:

Categories May 2022 April 2022 Percentage Change
Number of Transactions 7,283 8,008 -9.05%
Number of New Listings 18,679 18,413 1.44%
Number of Active Listings 15,433 13,098 17.83%

Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in transactions when comparing May 2022 to May 2021 and April 2022. The breakdown per area and product type follows:

Number of Transactions Comparison
Product Type Changes from May 2021 to May 2022 Changes from April 2022 to May 2022
Toronto GTA Toronto GTA
Detached -34.8% -42.6% -6.22% -6.59%
Semi-Detached -29.1% -44.4% +1.61% -11.20%
Townhouse -47.9% -40.8% -20.30% -4.74%
Condominium -32.5% -29.5% -15.05% -14.74%

It is important to recognize that with a total of 18,679 new listings there was a total of 7,283 properties sold which is approximately 40%; this is still indicative of a balanced market. With a total of 15,433 properties available and between 7,000 to 8,000 sold properties in each of the last two months it indicates roughly a two months supply of properties available for purchase which is still, by definition, a seller’s market.

Footnote: Source of statistical data is from the May 2022 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

D_Monthly Percentage Change in Average Sale Price - March 2022

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