High mortgage rates lead to 23-year low for GTA home sales
December 2023 TRREB Recap
Penelope Graham, Director of Content
The Greater Toronto Area housing market just had its slowest year in over two decades, as steep borrowing costs bit would-be buyers right in the wallet.
The year-end data released by the Toronto Regional Real Estate Board (TRREB) reveals just 65,982 transactions occurred for the whole of 2023, the lowest sales volume since the year 2000, and down -12.1% compared to 2022. While the market also struggled with the supply of new homes, which fell -9.4% year over year, softer sales activity was enough to pull down the average home price in the GTA, which came in at $1,126,604 – a -5.4% decline from 2022.
The market fared better from a standalone monthly perspective, with December sales marking an 11.5% increase with 3,444 properties trading hands, and an average price of $1,084,692 (3.2% YoY) New listings continued to contract – a seasonally typical occurrence as sellers take a pause from listing during the holiday season – with just 3,886 homes brought to market, an annual decline of -6.6%.
2023 buyers grappled with tough mortgage conditions
Overall, Canada’s challenging mortgage market is to blame for the slowdown in buyer demand, says TRREB’s new president Jennifer Pearce.
“High borrowing costs coupled with unrealistic federal mortgage qualification standards resulted in an unaffordable home ownership market for many households in 2023,” she stated. “With that said, relief seems to be on the horizon. Borrowing costs are expected to trend lower in 2024. Lower mortgage rates coupled with a relatively resilient economy should see a rebound in home sales this year.”
A recent study conducted by Ratehub.ca on affordability conditions across Canada found that while softening home prices are starting to move the dial, high mortgage rates – and the resulting mortgage stress test – continue to pose a challenge for many borrowers. According to the report, the average stress test used to qualify borrowers is currently 8.5%, based on an average fixed mortgage rate of 6.5%.
Also read: Ratehub.ca’s 2024 mortgage predictions
Not sure where to start? Let us help you get started
The cost of borrowing has soared over the course of 2022 and 2023 as the Bank of Canada hiked its benchmark interest rate a historic 10 times in order to combat runaway inflation growth. However, recent commentary from the Bank hints the hiking cycle is now in the rearview, as inflation was tamed down to 3.1% in November, following an 8.1% peak last June. As a result, economists and investors anticipate rate cuts could occur as early as the spring, ushering in some much-needed relief for beleaguered borrowers.
GTA market poised to reheat in 2024
Lower mortgage rates – even slightly so – could cause an important psychological shift among the home buyers who sat on the fence last year to ride out rate volatility. That, coupled with forecasted record immigration, will ramp up market competition, quickly driving prices back up in the coming months, says TRREB Chief Market Analyst Jason Mercer.
“Buyers who were active in the market benefitted from more choice throughout 2023. This allowed many of these buyers to negotiate lower selling prices, alleviating some of the impact of higher borrowing costs. Assuming borrowing costs trend lower this year, look for tighter market conditions to prompt renewed price growth in the months ahead,” he stated.
Also read:
Penelope Graham, Director of Content
Penelope has over a decade of experience covering real estate, mortgage, and personal finance topics and her commentary on the housing market is featured on both national and local media outlets.