What trends are we seeing?
When reviewing the fluctuation of sale prices over the course of the year we are cognisant that many of the articles published discuss the change in sale prices from the peak of the market in February 2022. While this figure should be reviewed, we also focus on the trends we are seeing on a month over month basis and the figures relative to the same month of the prior year. Notable is that the average price has been increasing on a month over month basis since July 2022. A factor influencing this trend and combating interest rate increases is ongoing reduced supply of properties for purchasers to consider. While interest rate increases continue to impact the purchasing power of purchasers, there are purchasers who will move regardless of market conditions (interest rates) and continue to participate in the real estate market. The market that exists is one with limited supply to work with, holding prices relatively stable and slightly increasing month over month.
What lies ahead for 2022?
As the year has proceeded “what lies ahead?” question has become murkier. The unknown economic, political, and social dynamics continue to remain in place and to some extent have become exacerbated. The utilization of interest rate increases as a blunt tool to reduce inflation coupled with opposing political changes to either curb demand or appease the apublic interest results in many people sitting on the sidelines… sellers included.
Stepping back and reviewing the average length of time that interest rate increases take to impact inflation to a point that the government stabilizes or reduces interest rates we can expect a lightening up of interest rate at the end of the third quarter or beginning of the fourth quarter of 2023. When a government implements policy to “recede” the economy it generally results in a recession. This process appears to be inevitable at this time, however, it should be noted that the fundamentals of the economy continue to be strong and that the depth of any correction is expected to be shallow and the length short.
Short- and medium-term price expectations may be turbulent in some pockets, or more specifically, purchaser opportunities are likely to exist on a case-by-case basis due to specific financial distress or sellers having better use for the funds. The opportunity cost of holding for a real estate while waiting for market escalation is not enticing enough so they may deleverage from real estate slightly below market value with their focus being on other opportunities.
The short term and longer-term supply-side discussions also support a shallow and short correction. Proposals such as redistributing Greenbelt land (regardless of its merit) underscore the development and density challenges Toronto and the GTA face. Fundamentally real estate has been an asset class that performs well and outperforms other assets when held over longer periods of time (five to 10 years plus). Making purchasing and selling decisions during what is expected to be a shallow correction with a long term outlook provides opportunities for real estate market participants over the next six to 18 months.
What is Happening with Sale Prices
Average sale price for all property types for the month of October dropped by 5.7% year-over-year to $1,089,428 in October 2022 from $1,155,624 in October 2021. Month-over-month saw a 0.25% increase from September 2022 to October 2022. On the Toronto Regional Real Estate Board (TRREB), for Toronto and the GTA, when broken down by product type and comparing October 2022 to October 2021, and September 2022 to October 2022, the average sale prices changes are as follows:
| Sale Price Comparison | ||||
| Product Type | Changes from October 2021 to October 2022 | Changes from September 2022 to October 2022 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -9.9% | -11.8% | +1.48% | -1.64% |
| Semi-Detached | -7.6% | -6.3% | +0.75% | +1.59% |
| Townhouse | -2.2% | -4.0% | +6.30% | +0.57% |
| Condominium | 0% | +5.7% | -3.73% | +2.19% |
Number of Transactions Trend
When comparing October 2022 to October 2021, we saw the following trend:
| Categories | October 2022 | October 2021 | Percentage Change |
| Number of Transactions | 4,961 | 9,743 | -49.1% |
| Number of New Listings | 10,390 | 11,749 | -11.6% |
| Number of Active Listings | 13,023 | 7,748 | +68.1% |
When comparing October 2022 to September 2022, we saw the following trend:
| Categories | October 2022 | September 2022 | Percentage Change |
| Number of Transactions | 4,961 | 5,027 | -1.31% |
| Number of New Listings | 10,390 | 11,237 | -7.54% |
| Number of Active Listings | 13,023 | 13,534 | -3.78% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in number of transactions when comparing October 2022 to October 2021 and September 2022. The breakdown per area and product type are as follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from October 2021 to October 2022 | Changes from September 2022 to October 2022 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -43.3% | -46.9% | -20.52% | -9.18% |
| Semi-Detached | -44.8% | -51.9% | +11.67% | -23.68% |
| Townhouse | -56.7% | -46.6% | +8.19% | -3.34% |
| Condominium | -53.5% | -54.2% | +1.49% | +1.81% |
Footnote: Source of statistical data is from the September and August 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
