What Trends Are We Seeing?
Real estate prices in Toronto and the Greater Toronto Area (GTA) are displaying resilience. Despite a sales-to-new listing ratio (SNLR) of 32.3%, technically indicating a “buyer’s market,” average home prices have increased by 3.5% from October 2022 to October 2023. Detached, semi-detached, and townhouse prices in the area have risen by 6.1%, 2.1%, and 1.1%, respectively, while condos saw a 1.2% price drop.
Furthermore, for the second consecutive month, we’ve witnessed a month-over-month average price increase, up by 0.6% to $1,125,928.
Although the number of home transactions on the Toronto Regional Real Estate Board (TRREB) has decreased by 5.8% year over year, dropping from 4,930 in October 2022 to 4,646 in October 2023, sellers remain confident in achieving their desired prices. Some buyers are rationalizing their decisions to proceed, as average prices remain below the 2022 peak, thus partially offsetting the impact of higher borrowing costs.
Notably, the SNLR increased from 28.6% in September 2023 to 32.3% in October 2023, signaling a shift toward a balanced market. It’s worth remembering that an SNLR between 40% and 60% denotes a balanced market, below 40% is a buyer’s market, and above 60% signifies a seller’s market. Given the potential for swift market shifts in Toronto and the GTA, monitoring this ratio is advisable in the coming months, especially as buyer confidence may be influenced by stable interest rates.
What Lies Ahead?
The future of the real estate market hinges on several key factors, including affordability, GDP, unemployment, immigration, interest rates, and inflation. Affordability has become a major challenge across most of Canada, particularly in major markets where it’s worsening.
The deteriorating affordability in the Canadian housing market can be attributed to supply shortages, population growth, and rising mortgage rates. Affordability is currently at its lowest point in a generation, and a mere two percent increase in average home prices in the fourth quarter would set a new record. Despite the Canadian government’s immigration targets remaining unchanged until 2025, the population has increased by over one million between 2022 and July 2023, creating a significant demand-supply imbalance in various housing market segments.
If GDP remains in line with current projections for the third quarter, Canada could technically slip into a mild recession, with a 0.1% contraction in the third quarter and 0.2% in the second quarter. Even a “modest” recession is likely to influence the Bank of Canada’s decisions regarding interest rate increases.
On the employment front, consumer confidence is impacted by the jobless rate, which has seen increases in four of the last six months, now sitting at 5.7%. Labor demand is cooling, and Canadian business insolvencies have risen by 41.8% compared to last year. These insolvencies are likely a result of the withdrawal of COVID-19 support, higher interest rates, and a slowdown in consumer spending.
Taking these factors into account, it’s reasonable to expect that interest rates will remain steady and may have reached their peak in the effort to curb inflation unless there’s an unexpected surge in core inflation numbers. The question then becomes when interest rates will start to decrease. Many economists believe that interest rates will only begin to drop when the Bank of Canada sees inflation much closer to two percent (between 2.3% and 2.5%). The current interest rate environment is likely here to stay until at least mid/end 2024. It’s worth noting that the Bank of Canada has its own motivation to lower interest rates before 2025 and 2026, as over 57% of outstanding mortgages are due to reset during those years. If these mortgages reset at current interest rate levels (a 22-year high of five percent), it could potentially create another shock to the economy and housing market volatility.
In summary, there are many factors to consider, and the real estate market can shift rapidly. As a buyer, taking action in late 2023 or early 2024 may be a strategic move to stay ahead of market changes. As a seller, despite the technical buyer’s market, prices are continuing to rise, and a shift in interest rates along with buyer enthusiasm could be on the horizon in 2024.
What is Happening with Sale Prices
| Sale Price Comparison | ||||
| Product Type | Changes from October 2022 to October 2023 | Changes from September 2023 to October 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | +8.2% | +4.7% | -0.32% | +0.5% |
| Semi-Detached | +4.7% | -0.6% | -0.3% | -1.3% |
| Townhouse | +1.1% | +1.1% | +2.5% | -2.2% |
| Condominium | -1.7% | -0.4% | -0.4% | +0.7% |
Number of Transactions Trend
When comparing October 2023 to October 2022, we saw the following trend:
| Categories | October 2023 | October 2022 | Percentage Change |
| Number of Transactions | 4,646 | 4,930 | -5.8% |
| Number of New Listings | 14,397 | 10,433 | +38.0% |
| Number of Active Listings | 19,540 | 13,019 | +50.1% |
When comparing October 2023 to September 2023, we saw the following trend:
| Categories | October 2023 | September 2023 | Percentage Change |
| Number of Transactions | 4,646 | 4,642 | 0.1% |
| Number of New Listings | 14,397 | 16,258 | -11.4% |
| Number of Active Listings | 19,540 | 18,912 | 3.3% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in number of transactions when comparing October 2023 to October 2022 and September 2023. The breakdown per area and product type are as follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from October 2022 to October 2023 | Changes from September 2023 to October 2023 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -1.5% | -7.2% | +6.7% | -1.8% |
| Semi-Detached | -3.0% | -3.3% | +21.3% | -3.3% |
| Townhouse | -11.5% | -11.5% | -8.0% | -0.2% |
| Condominium | +0.2% | -7.0% | +3.9% | -9.6% |
Footnote: Source of statistical data is from the September 2023 and October 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
