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In a reversal of a normal spring market, the number of sellers launching their properties onto the Toronto-area market has been shrinking until now instead of expanding.COLE BURSTON/The Canadian Press

The spring real estate market in the Toronto area is bringing out the tenacity in buyers as they grapple with high borrowing costs, vanishing sellers and an undercurrent of uncertainty about the rest of the year.

“This is not a tire-kicker market,” says Davelle Morrison, broker with Bosley Real Estate. “Anyone who is a buyer in this market is a serious buyer,” she says.

Higher interest rates make it difficult for many potential buyers to qualify for a mortgage and pass the stress test, she says.

To add to the vexation of those who do complete the financing hurdles, desirable properties are exceedingly difficult to come by.

In a reversal of a normal spring market, the number of sellers launching their properties onto the market has been shrinking until now instead of expanding.

New listings in the Greater Toronto Area (GTA) tumbled 44.3 per cent in March from the same month last year, according to the Toronto Regional Real Estate Board.

Sales in March in the GTA fell 36.5 per cent compared with March, 2022, according to TRREB. The average price dropped 14.6 per cent to $1,108,606 from $1,298,666.

Daren King, economist with National Bank of Canada, notes that seasonally adjusted sales in the GTA rose 1.6 per cent in March from February.

Despite early signs the Toronto market is stabilizing, Mr. King adds, the level of sales remains well below the historical average – and will likely remain there for a while.

New listings, meanwhile, dropped 9.6 per cent on a seasonally adjusted basis in March from February following a 23.8-per-cent decline the previous month, Mr. King points out.

That decrease, combined with higher sales, led to fewer active listings and a tighter market than the historical average.

The likelihood of a recovery in the housing market remains low, in Mr. King’s opinion, because he expects the Bank of Canada to keep its benchmark interest rate at its current restrictive level for most of 2023.

Ms. Morrison says that the March break for Ontario schools is one reason sellers were discouraged from listing last month. Private schools have a two-week break, she notes, and many families tend to leave town.

She expects more listings to arrive later this month – following the Easter and Passover holidays.

Ms. Morrison held off listing a bungalow near Victoria Park Avenue and Lawrence Avenue East until after the long weekend because it’s in a neighbourhood that appeals to families, she says.

She plans to set a deadline for offers for the property, which will have an asking price just below $1-million. The house needs work, she says, but she expects it will sell above the $1-million mark.

The lack of inventory is leading to multiple offers for some single-family houses in the city core.

Agents who set a low asking price and an offer date will often spark competing bids for houses, Ms. Morrison says, but that strategy is less successful in the condo segment, where units often remain on the market for three or four weeks.

Rishi Sondhi, economist at Toronto-Dominion Bank, believes that Canadian home sales may have reached a trough after a dramatic slide over the past year.

Average prices, meanwhile, likely have some modest downside left, Mr. Sondhi says. He forecasts a bottom for prices in the second quarter.

One key risk to his outlook, Mr. Sondhi warns, is the possibility that the federal banking regulator will add more rigour to the rules surrounding mortgage lending.

The Office of the Superintendent of Financial Institutions (OSFI), which oversees prudent residential mortgage underwriting, unveiled a proposed slate of stricter guidelines in January.

The OSFI points to high household debt in Canada as one reason for examining the rules. The first phase of public consultation ends this month.

Officials will consider that feedback and a draft of the proposed revisions to Guideline B-20 will be issued before a second round of public consultations, an OSFI spokeswoman says.

The OSFI has not provided a timeline for when a final guideline may be published.

If the rules as proposed are implemented, federally regulated banks would be required to limit the share of highly leveraged borrowers they have in their mortgage portfolios. The OSFI is also considering tightening debt servicing metrics and toughening the mortgage stress test.

If the changes are ushered in, high-risk borrowers will find it harder to qualify for a mortgage with the big banks, industry watchers say. Some buyers may seek out alternative lenders, which are not regulated by OSFI, while others may delay purchasing all together.

Ms. Morrison is concerned that stricter guidelines may bring a chill to the market later this year.

“I’m telling sellers and buyers to get out before the rules change,” she says.

The recent failure of Silicon Valley Bank and the rescue of Credit Suisse by UBS may add to the mood of caution in this country, Ms. Morrison adds.

Ms. Morrison is also seeing an increase in the number of properties listed under “power of sale”. In many cases, a private lender is listed as the seller, she says.

“Some of those private lenders have taken over the house.”

Private lenders often provide cash for a shorter term than a conventional mortgage, she explains, and when the term is up, some lenders are deciding not to renew.

Higher payments are also pushing some borrowers into defaulting on their loans.

A recent search by Ms. Morrison found properties listed under power of sale appear across a range of prices, from around $700,000 to one listed for $3-million.

Ms. Morrison is seeing an increasing number of such listings, but she advises buyers not to expect significant bargains.

“They are not rock-bottom prices,” she says.

Mr. Sondhi at TD says the potential for further bouts of financial market turbulence and a weaker-than-forecast economic performance also pose risks to his outlook.

That outcome would produce more job losses than expected, which would in turn weigh on demand for real estate, and possibly cause forced selling.

That scenario, however, would also bring about lower interest rates which would offset the other factors, Mr. Sondhi adds.

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