Since the peak in 2022, Toronto’s real estate market has been in a funk. Over that period of time, we’ve seen a few key themes emerge:
- A decrease in price, which later stabilized into a sideways market with typical seasonal patterns
- A decrease in sales, which has made the market much more competitive for realtors
- An increase in listings, which has given buyers more pricing power
- An increase in distressed sellers, as indicated by power of sale listings
This has translated to a large decrease in real estate industry activity, which is a significant change given the remarkably strong market seen in 2023.
Real estate AI platform Valery.ca recently published some data from Statistics Canada that illustrates this reality in activity at the offices of real estate agents and brokers:
The Greater Toronto Area (GTA) experienced a significant shift in its housing market in 2023, with a particular emphasis on the rental market due to ongoing affordability challenges. The year witnessed fewer home sales, primarily attributed to high mortgage rates and stringent mortgage qualification standards.
Key highlights from the Toronto Regional Real Estate Board (TRREB)’s January release include:
- A 12.1 per cent decrease in home sales compared to 2022, with 65,982 sales reported
- The average selling price for all home types was $1,126,604, a 5.4 per cent decline from the previous year
- The market saw an increase in rental demand, influenced by record immigration levels:
The GTA recorded less than 70,000 home sales in 2023. The last time we saw this number of sales was in 2008 when we had far fewer realtors. This has translated to a massive decline in the number of transactions per realtor.
Jennifer Pearce, TRREB’s new president, expressed optimism for 2024. She anticipates a decline in borrowing costs and a resilient economy, which could lead to a rebound in home sales.
I can’t find the data to support that our economy will be resilient, but we are seeing bond yields come down, indicating that borrowing costs will be reduced. This typically takes place at the forefront of a recession, which furthers my resolve that our economy likely won’t be strong this year.
There’s a solid chance that December and January mark the volume bottom (NOT PRICE) of this housing cycle, as the lowest months of the year on the tail end of the lowest year we’ve seen in decades. So, I guess it would be correct to say that we’ll see a rebound in home sales.
The worst may be over for realtors as volume begins to recover, but there’s no way of knowing if it’s over for sellers. The fate of housing prices seems to rest exclusively in the hands of housing affordability, which is a dynamic function that includes house prices, interest rates, incomes and job stability.
The easiest way to think about it is like this: people will start buying homes when they can afford to. I think we’re still a long way from that.
Daniel Foch is a real estate broker, working in the real estate industry for over 15 years with various notable organizations such as Interrent REIT, CBRE, and Hydro One. Daniel and his team have transacted over $250M in real estate across a variety of asset classes. During his academic career, Daniel was an active instructor, contributor and researcher in the University of Guelph’s Real Estate Faculty, founder of The University’s International URECC event, and was awarded for affordable housing innovation by CMHC & The University of Guelph during his tenure at the university.
Daniel is a regular contributor in the Canadian media as one of the most trusted, unbiased, and balanced sources of real estate insight. As a result, his real estate expertise has been featured in The Wall Street Journal, CBC, BNN Bloomberg, and The Globe and Mail, among others. Daniel has built a captive audience of over 100,000 real estate investors across multiple social media platforms by providing primary research and market analysis.
Better column – esp the “I can’t find the data” dig
Affordability remains brutal especially for young families. First-time buyers without other large debt are probably a good bet as far as increased sales activity goes. The stats in Hamilton bear this out, to a degree. We are in a real quandary with persistently high house prices and interest rates, high property taxes, high food and utility costs, etc., not too mention vehicles, daycare, kids clothes and on and on. I think we have bumpy road ahead but, as we say in our business, the market is the market. There is certainly opportunity out there for those who can and those who are bold!
I would like to see prices come down significantly so the younger families can get into a first home. Once upon a time, before the Pandemic mass exodus from the cities to the country, buyers could find cheaper homes in the country areas around the city. This is no longer the case. That has had the most impact on the first time buyers – combine this with high interest rates – it’s not going to be easy for many of them. I hope jobs will eventually begin to pay higher wages to close that affordability gap.
Yes that used to be the case Anna, but being a Broker in the midwestern Ontario market it was mostly the fault of these city buyers during 2021-22 that caused these prices to skyrocket here. With multiple offers and not knowing these markets money flew in but now these same Buyers are stuck with huge mortgages and their properties aren’t worth close to what they paid. I’m hoping banks realize this and make it easier for first time Buyers to get in or I can see all of this being a huge problem.