Number of sales in August 2023, down 5.2% from August 2022
Industry real estate experts project a continued balanced market for the Greater Toronto Area (GTA) heading into the fall and winter.
On Sept. 6, the Bank of Canada announced it was holding the interest rate at five per cent, with the economy showing signs of cooling down, but didn’t rule out the possibility of further rate hikes going forward (the next scheduled meeting is Oct. 25).The inconsistency of messaging regarding rate increases set the market into a state of volatility earlier this year, with home buyers thinking they had seen the peak of the mountain and setting off an acceleration in demand in early spring. But then the market saw another wave of hikes.
“That up and down has bred uncertainty,” says Toronto Regional Real Estate Board (TRREB) chief market analyst Jason Mercer. “It’s not necessarily the case that people don’t want to purchase a home or are planning on purchasing a home at some point in the near future. It’s just that, right now, they’re biding their time to sort of see where we’re going in terms of borrowing costs and, I think more broadly, how the interest rate situation is going to fully play out.”
No one has a crystal ball, so no one can predict further rate hikes, and the market needs to wait and see the full impact the previous rate increases have had on the economy.
“I think September … will guide a lot of people in terms of where they are, whether they remain the sidelines for the remainder of 2023 or if you start to see people say, ‘Look, I kind of got a sense of what the situation is, and I’m comfortable moving back into the marketplace,’” Mercer adds.
The GTA market through August, as it was in July, was more balanced compared with the more heated market the region saw in the spring.
Cameron Forbes, chief operating officer, general manager and broker at Re/Max Realtron Realty Inc., says we’ve been accustomed in the GTA to having a seller’s market with supply issues and bidding wars.
“There will be a market in the fall, but it certainly won’t be the 200-kilometre-per-hour market, which sometimes we compare ourselves to,” he says. “It will be more similar to last year. I would describe it as kind of driving the speed limit or slightly less than the speed limit. And that’s what I’d say the fall will be.”
The Royal LePage house price survey conducted in the second quarter of this year predicted that prices would remain relatively flat for the remainder of the year compared with 2022, says Karen Yolevski, chief operating officer at Royal LePage Real Estate Services Ltd.
“So far, as we move through late summer, that’s what we have been seeing,” she says. “Median aggregate prices in July and August were both above last year, although they cooled off a little compared to May and June.
“The reason why we think that this trend is going to continue is generally what we’re seeing out there is a chronic shortage of supply and, by supply, not just homes available and being built, but homes coming on the market,” she adds. “We’re not seeing homes coming on the market; in part that’s due to sellers having a hesitancy to list.”
People are nervous, wondering where they will move if they sell their home, if the supply is not out there.
“We are in a supply lock, and that’s really blowing up these prices, despite the fact we have seen interest rates go up over the summer months,” Yolevski says.
Cailey Heaps, a broker with Heaps Estrin/Royal LePage in Toronto, says their expectation is that we are in for a shorter fall market.
“It will start the week of Sept. 11, and I think it will quiet down by the end of October, beginning of November,” she says. “I think that we’re going to see an increase in volume coming to market in September. I know that personally we’re bringing 35 listings out, about $110-million in value. So that’s a fair amount of inventory to hit the market. I think that we will see strength in the fall. I think that there are outstanding mortgage approvals … they’re on old approvals and the rates have since gone up so they’re going to be motivated to buy probably by mid-October.”
The fall market will be “decent,” followed by a quiet November, December and January, she says, adding that it will be important to keep an eye on the impact of increases in land transfer taxes on properties over $3-million, passed by Toronto’s City Council Sept. 6. (The land transfer tax will go up to 3.5 per cent on homes valued between $3-million and $4-million, 4.5 per cent on homes valued at more than $4-million up to $5-million, 5.5 per cent on homes valued at more than $5-million up to $10-million, 6.5 per cent on homes valued over $10-million up to $20 million, and 7.5 per cent on homes over $20-million, and will take effect Jan. 1, 2024.)
“It’s huge change,” Heaps says. “That will be very damaging to the market, and make people not move.”
Heaps says people still buy and sell real estate for reasons outside of interest rates – even in the 1980s when interest rates were almost 20 per cent. They are having children. They are changing jobs. Interest rates can impact their spend, but not their motivation to move. She talks about the busy summer her brokerage had on the transaction side and highlighted an off-market listing, a renovated semi-detached, in late August priced at just over $4-million that had six showings and sold for full price in two days.
“The media gives a perception of what’s happening in the market,” she says. “And sometimes it’s accurate but, unless you’re actually in the market, it’s so hard to understand what’s happening. But I would say this has been one of the strongest summers I’ve worked in a long time.”
Mercer says TRREB has forecast low to mid sales in the GTA of 70,000 for 2023, and the market is on track to hit that.
“That’s certainly lower from an historic perspective and sort of represents the uncertainty and higher borrowing costs environment that that we’re in right now,” he says. “I’m certain as you move through 2024 and into 2025 the demand overall for housing is going to continue to increase. We’re seeing record levels of immigration into Canada, and a lot of that is focused on the GTA and Golden Horseshoe region.”
The housing deficit is a challenge everyone in the industry knows about, and TRREB chief executive officer John DiMichele has been in the recent past outspoken about the “misalignment in public policy” as it relates to housing.
“When you look at some of the polling over the last couple of years, we see that immigrants in Canada actually have a higher propensity to buy than people who are born here,” Mercer says. “And so it makes sense in major centres like the GTA … you start to see a rebound in home ownership over the next couple of years.”
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