What trends are we seeing?
For the months of August and September we have seen a change in direction with respect to price growth. From July to August, there was a 0.44% increase in average sale price, while August to September there was a 0.67% increase. The main drivers of this change come from the transactions in the Semi-detached, Townhouse and Condominium product types. This may be a reflection of the high cost to borrow money and so buyers are looking to more affordable options when compared to detached homes. Buyers have the capacity to purchase, however, are waiting on the sidelines to “time the bottom” capitalizing on a less buoyant market than has traditionally been seen, and then benefit from an expected rebound in prices. Much like what was experienced in 2017 where the average sale price dropped by roughly 12.0% from the all-time highs and has since been recuperated and surpassed in recent years, a similar situation may take place over the upcoming 12 to 18 months. Despite the slow pace, Toronto and the Greater Toronto Area (GTA) still has a shortage in homes and if expected population growth comes to fruition there is a need for a longer-term solution to increase supply creating a sustainable balanced market.
What lies ahead for 2022?
In January we saw the overnight interest rate start the year off at 0.25%. Since then, the Bank of Canada has raised the interest rates to 3.25% with another scheduled announcement on October 26, 2022. In an effort to curb inflation and to reel in the rapid growth of the housing market, the Bank of Canada aims to bring the current inflation rate as of September 2022 from 7.0% back to the norms of 2.0% inflation year-over-year. Knowing that the main governing body of our economy is focused on achieving a stable inflation rate and understanding how far we still need to go to accomplish this, we can expect ongoing pauses in buyer’s willingness to move forward and reduced number of transactions relative to the highs of 2021 transactional levels. These pauses have historically been short lived and as buyers become accustomed to more standard interest rates, they may move back into the market sooner than expected with the back-end of 2023 potentially resembling the Toronto and GTA real estate market we have seen over the last 10 to 15 years.
What is Happening with Sale Prices
Average sale price for all property types for the month of September dropped by 4.3% year-over-year to $1,086,762 in September 2022 from $1,135,027 in September 2021. Month-over-month saw a 0.67% increase from August 2022 to September 2022 with average sale prices being $1,079,500 in August. On the Toronto Regional Real Estate Board (TRREB), for Toronto and the GTA, when breaking down by product type and comparing September 2022 to September 2021, and August 2022 to September 2022, the average sale prices changes are as follows:
| Sale Price Comparison | ||||
| Product Type | Changes from September 2021 to September 2022 | Changes from August 2022 to September 2022 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -11.0% | -9.5% | -3.80% | -0.24% |
| Semi-Detached | -7.3% | -4.2% | 7.39% | 0.69% |
| Townhouse | +1.3% | -1.4% | 3.34% | -0.73% |
| Condominium | +3.4% | +3.3% | 4.36% | -0.19% |
Seeing how average sale prices have increased slightly month-over-month in the last two months despite having the overnight interest rate increase in the beginning of September, may indicate that buyers who were pre-approved at lower interest rate are looking to take advantage of those rates sooner rather than later. Year-over-year comparison illustrates differing stories where the overall economic conditions with September 2021 was impacted by the pressure of the pandemic compared to September 2022 where the pressure is a combination of the pandemic, global conflict, and rising interest rates.
Number of Transactions Trend
The overall pace of the market is illustrated by the number of transactions, the number of new listings and the number of active listings. When looking at the number of transactions we see a significant drop year-over-year, combined with increasing number of active listings on the market, this tells us that properties are staying longer on the market. This in turn gives buyers more control in negotiations as we see more conditions being added to offers when compared to the beginning of the year.
When comparing September 2022 to September 2021, we saw the following trend:
| Categories | September 2022 | September 2021 | Percentage Change |
| Number of Transactions | 5,038 | 9,010 | -44.1% |
| Number of New Listings | 11,237 | 13,494 | -16.7% |
| Number of Active Listings | 13,534 | 9,187 | +47.3% |
When comparing September 2022 to August 2022, we saw the following trend:
| Categories | September 2022 | August 2022 | Percentage Change |
| Number of Transactions | 5,038 | 5,627 | -10.5% |
| Number of New Listings | 11,237 | 10,537 | +6.6% |
| Number of Active Listings | 13,534 | 13,305 | +1.7% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in transactions when comparing September 2022 to September 2021 and August 2022. The breakdown per area and product type follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from September 2021 to September 2022 | Changes from August 2022 to September 2022 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | -44.3% | -38.7% | -2.7% | -10.1% |
| Semi-Detached | -44.4% | -35.4% | 13.2% | -12.5% |
| Townhouse | -53.0% | -44.4% | -6.0% | -12.5% |
| Condominium | -51.0% | -49.2% | -14.9% | -7.7% |
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
