Nobody truly knows what’s going to happen in Toronto’s housing market. “Will Toronto house prices drop in 2023?” I don’t know for sure. Nor does the local news, or your uncle. I look at Toronto’s housing market as a wild beast that cannot be tamed but one that can definitely be understood. And to understand it, I rely on numbers & statistics. I study home prices, property types, local neighbourhoods, macroeconomic factors, and a lot of other tiny details before coming to any conclusion about the Canadian housing market.
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If you’re an investor, serious about investing in Toronto’s housing market – first things first – do not fall prey to click-bait headlines. I recently had a new client come to me, a first-time home buyer, extremely keen to buy a house in Toronto. In our very first conversation, he confessed, he had no clue about Toronto’s housing market but that the newspaper headlines were scaring him. As I said, nobody can accurately predict what the real estate market of tomorrow is going to be. But, especially not reporters who prefer clicks over truthful statistics. Nobody can definitively tell you if house prices are going up or down – but certainly not a journalist who doesn’t spend their time analyzing real estate transactions.
Read the headlines, and read the entire news piece but don’t flat-out believe them. Look for numbers that justify the rationale before buying into any narrative. Beyond that, ensure the data you’re paying attention to is local and pertinent to you.
As a real estate agent, I spend a lot of time analyzing the real estate market every day, trying to understand its ebb and flow by looking at a number of factors from buying intentions to housing supply. In recent months, I have come across a number of news pieces by the Canadian press that I feel don’t do justice to the topic.
In this blog post, I share my housing market predictions for 2023.
What’s Really Going On In Toronto’s Housing Market Today?
According to Jason Mercer, Chief Market Analyst at TREEB, “It will be a year of two halves in 2023. The first half will feel similar to the fall of 2022 due to the lingering effects of higher borrowing costs and related economic uncertainty. However, recent polling by Ipsos suggests buying intentions are edging up. The second half of 2023 should be characterized by an increase in demand for ownership housing, supported by lower fixed mortgage rates, a relatively resilient labour market, and record immigration”.
Now, ask yourself this – if you could buy a Toronto property 5 years ago, would you do it?
If you answered “yes”, you can get it on the action today – at pretty similar price points. While the resale market has not dipped to the 2018 levels, the assignment market has.
Truth be told – this won’t last much longer. As soon as re-sales prices rebound, you’ll be SOL to find assignment sales at their original purchase price. If you’re ready to buy at prices from 5 years ago and want to know what deals I would recommend, book a call with me here.
Remember, if this market has taught us anything, it’s that not all deals are created equal. If you’re keen on what’s really going on in Toronto’s housing market in 2023 – these are the 7 key observations that I made after going through all the latest reports and statistics.
Competition Amongst Homebuyers Heating Up,
I am writing this blog in the first week of March and I can confidently say that the competition for buying houses is heating up. In the first week of February, 74% of home listings in urban Toronto (C01-C08) received multiple offers and sold over the asking price. Some buyers are coming back to the market anticipating good news in the future. Houses are under-supplied in Toronto and depending on the neighbourhood – the situation could be even direr.
Long story short: demand for houses is slowly but steadily climbing. If you’re in the market expecting to pick up a property at discounted rates, such as those that prevailed in 2022 – you’ll be disappointed. Those rates are long gone. $1 million houses that were costing around $800k last year are now creeping back to the $1 million mark – even exceeding it in some cases.
Toronto’s Real Estate Market Enter ‘Fair Market Territory’
Interest Rate Hike Pause Boosts Confidence In Toronto’s Real Estate Market
I believe that people have regained their confidence in the market and are optimistic about the forecast of interest rate hikes. The Bank of Canada has signaled a pause, and as a result, there hasn’t been any increase in interest rates. Additionally, the recent US banking drama has impacted bond yields, which will eventually affect interest rates. As a result, people have started to enter the housing market with more certainty and confidence.
Condominium Market Will Take Time To Rebound But It’s Moving Again
Condos have suffered the most in the Toronto housing market crash – more from a sales volume perspective than average price. Condos simply come second to homes and while there’s a lot of competition amongst home buyers, the same cannot be said for the ‘condo buyers’.
Condos are over-supplied. Months of low sales volume have not helped with many condos going unsold, adding to the existing inventory. But now due to the positive news surrounding the interest rate hikes – we are seeing the lower-end condominiums certainly begin to move again. I find it interesting that luxury condos too are slowly picking up pace again!
Condo Buyers – Take Advantage of Less Competition (It Won’t Last Long)
As mentioned above, the condo market has yet to hit its full stride. There is still ample opportunity for buyers and investors alike to find a good deal. Especially in the mid-market as competition has already begun to heat up for entry-level suites.
Spring Market Is Here For Toronto Homes
The onset of the ‘spring’ market each year can vary, and for 2023, I believe it has arrived for Toronto’s housing market, although it’s yet to happen for the condo market. If you’re planning to list your Toronto home, there’s no better time than now. With a decrease in inventory, competition is getting more intense. However, as we move further into the ‘spring’ market, I anticipate inventory levels will increase, which may temper the competition.
Pre-Construction Woes – Frozen Market, Bottoming Out At $1050PSF
When it comes to Toronto’s pre-construction market we’re still seeing slow growth. I don’t expect this to truly pick back up for another 6-months. For the pre-construction market to pick up, the resale market needs to first lead by example. Not to mention that the assignment market is where many cash-available investors are putting their dollars.
Quite honestly, I’ve said it time and time again – not all pre-construction investments all equal. While a healthy and hot market in previous years had many investors thinking they can’t lose, it’s clear in our now approaching ‘fair market’ that they simply were not. It’s important that you understand re-sale market comparable properties in comparison to your pre-construction investment.
When I promote a building as a good investment you’ll see that I do just that so you have a full understanding of how long you need to hold that property in a good market (appreciating 5%/year) to earn a profit. This past week there were a few assignments that were an excellent deal that actually went into multiple-offer scenarios. These assignments, offered at near-purchase prices are an excellent opportunity for Toronto real estate investors who are looking to take advantage of today’s market. Many assignment sellers are being backed into a corner, forced into off-loading their pre-construction purchases on assignment – at a relatively low price!
Macroeconomic Changes Will Continue To Impact Torontos’ Housing Market
Inflation, mortgage rate, job opportunities, and growing population – all these macroeconomic factors play a key role in regulating Toronto’s housing market. I’d recommend turning on your alerts to stay on top of news surrounding these topics. Simplified to its core: good news for the economy equals good news for the housing market. As a real state investor – you’re hoping for a fall in inflation rates, a fall in mortgage rates, a high employment rate & growing population levels. Even Mercer’s prediction for a strong second half in 2023 is highly dependent on the direction these macroeconomic factors take.
An example – One hypothesis on the reason why housing demand has picked up in February is the anticipation of the mortgage rate announcement scheduled for March. Some people think that the hike is going to halt – if not fall and they’re taking confidence from this rumour to position themselves ahead of the curve. On the other hand, many people are anticipating a rate increase based on the number of new jobs that were added to the economy so far this year. This may also be pushing buyers in that camp to lock in their rates and find a property asap.
RELATED: Benefits of Buying A Toronto Pre-Construction Condo AssignmentHR
Toronto Housing Market Forecast: Statistics & Analysis
Every year, Toronto’s Regional Real Estate Board (TRREB) releases a highly-anticipated Housing Market Outlook for the Greater Toronto Area. The 2023 digest just came out this week. If you’re new to the world of real estate investment, this report is a great resource to understand the pulse of the market. Below is a summary of the key stats shared in the 2023 report:
Toronto House Prices Chart: 2022
By Property Type
|Property Type||Sales Volume||Avg. Median Price|
Source: TREEB 2023 Market Outlook & 2022 Year In Review
Toronto Housing Market Statistics: 2022
152,873 new listings; down 8.1% compared to 2021
Total sales volume in 2022 at $75,140; down 39% compared to 2021
The average price for all property types sold in 2022 was $1.1 million; up 8.6%
63% of home buyers in 2022 were impacted by the Stress Test; the highest % since 2019
11,000 condominium units were expected to be completed in 2022
The average asking price for condo apartments is $1.12 million (Nov 2022)
The average asking price for a single-family home is $1.74 million (Nov 2022)
Toronto Housing Market Statistics: 2023
Summarising the key findings of TRREB’s Housing Market Outlook 2023:
28% of respondents will consider buying a home in Toronto in 2023; up 2% from 2021
46% of first-time home buyers have buying intentions for 2023; up 7% from 2021
39% of owners will consider listing their home in 2023; up 4% from 2023
The average selling price is expected to be $1.14 million for 2023; down 4% from 2022
The forecasted total sales volume for 2023 is 70,000; down 7% from 2022
Future Of Toronto’s Housing Market
What Can Be Done To Make Homes More Affordable In Toronto?
In one of the reports last year, TRREB offered commentary on two possible solutions that they believe should be considered to help improve buyer affordability.
Removing the stress test
Getting rid of the stress test, while improving immediate affordability is not helpful long term. Toronto is a stable, conservative market, and had the stress test not been in place before these current rate hikes, many people would have been in the position of not being able to afford them. This would have caused them to default and that would have affected property values similar to that of the 2008 global financial crisis.
I actually give the Stress Test a lot of credit for the stability in our Downtown Toronto Real Estate market and I don’t think that it should be removed. Especially with climbing rates, I think that we need that level of certainty, that people can afford higher rates, regardless of the level of sales in today’s market.
Introducing 40-year amortizations
Since what we are really struggling with is monthly affordability, offering buyers alternatives that actually lower their month-to-month costs seems more reasonable. In my opinion, this is what buyers actually want and need. 40-year amortizations would actually lower monthly payments and provide some sort of relief which is what I think Toronto homeowners would appreciate.
My thoughts on these 2 recommendations:
In some American states, they offer 15 and 30-year mortgage rates. To me, this seems like a much more logical solution to ensuring that someone can afford their home and that they wouldn’t be at risk of having to sell simply because of rising interest rates. I personally believe that this is another avenue that should be considered here in Ontario as it actually improves monthly affordability and that’s what Toronto homebuyers need.
Investing in Toronto’s housing market has never been more confusing. Don’t trust the headlines. Look at the numbers, do your own research, or lean on an expert who studies the market day-in-day-out. If you’re in the market looking for real estate investment opportunities today and find yourself confused, you can book a call with me or any member of my team and we’d be happy to help!