It was indeed a lazy late summer for the Greater Toronto Area housing market, with both home sales and average prices dipping on an annual basis in response to tougher affordability conditions.
According to the August data released by the Toronto Regional Real Estate Board (TRREB), a total of 5,294 properties traded hands over the course of the month, down -5.2% compared to the same time frame in 2022, and also marking a -1% contraction from July.
Price growth effectively stalled, with the annual average edging up by less than 1% to $1,089,496. That was also down by -1.6% on a monthly basis. The MLS Home Price Index, which reflects the most typical type of home sold in the region, rose by 2.5% year over year, and remained flat from July.
Prices would likely have softened further if not for the persistent supply-and-demand imbalance that lingers throughout the GTA. While a 16.2% increase in listings offered some badly-needed supply, year-to-date, properties for sale are still down sharply compared to last year.
Buyers and sellers remained sidelined due to rate hikes
While August is traditionally a lower-volume month in terms of market activity, uncertainty over interest rates – and rapidly eroding affordability – have pushed many would-be buyers and sellers to the sidelines, says TRREB’s chief market analyst Jason Mercer.
“More balanced market conditions this summer compared to the tighter spring market resulted in selling prices hovering at last year’s levels and dipping slightly compared to July,” he stated in the board’s release. “As interest rates continued to increase in May, after a pause in the winter and early spring, many buyers have had to adjust their offers in order to qualify for higher monthly payments. Not all sellers have chosen to take lower than expected selling prices, resulting in fewer sales.”
It remains to be seen whether the Bank of Canada’s latest rate hold will move the dial in terms of fall market demand. The last time the central bank eased off its hiking cycle in March, the market did indeed experience a surge in activity; GTA home sales rose 44% from February, while the average sale price broached that of the average listing price for the first time since the previous May. Conditions cooled rapidly again once the BoC returned to its hiking cycle in June and July, however.
“Time will tell how much confidence this gives potential buyers to go out and buy a home in the fall. It is possible even with this rate hold that elevated rates keep potential home buyers on the sidelines,” said James Laird. Co-CEO of Ratehub.ca and President of CanWise mortgage lender.
TRREB President Paul Baron emphasizes that “solid demand” for both ownership and rental housing will be a certainty in the near future throughout both the GTA and Greater Golden Horseshoe.
“Record immigration levels alone will assure this,” he states. “In the short term, we will likely continue to see some volatility in terms of sales and home prices, as buyers and sellers wait for more certainty on the direction of borrowing costs and the overall economy.”
Condos lead in terms of sales growth
As has been the long-term trend, the condo segment – the price of which remained flat at $705,572 – is driving the market in terms of sales growth, with a total of 1,609 units trading hands, a year-over-year increase of 7.6%. In terms of actual sales volume, though, detached houses remain in the lead, with 2,264 properties selling; down -12% from last year, at an average price point of $1,416,366 (2.8%).
A total of 446 semi-detached houses sold, down 14.4%, at an average price point of $971,090, while 936 townhouses sold, an increase of 0.6%, at an average price of $935,800 (3.9%).
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Sales are flat in City of Toronto, down in the 905
The impact of fewer qualified buyers was evident throughout both the City of Toronto and the surrounding “905”-area markets in August. Sales were flat within city limits with a total of 1,891 transactions, (0.6%). However, conditions softened slightly due to a 14.2% uptick in newly-listed homes, with also helped ease the average home price in the City of Toronto by -2.6% to $1,005,945 – a difference of $27,253, year over year.
Meanwhile, sales dropped by -8.1% year over year in the 905 region, with a total of 3,403 transactions. While a 17.3% increase in new listings helped east sellers’ conditions, the average 905 home price rose by 2% to $1,125,034.
What’s next for GTA real estate?
Much hangs in the balance of the Bank of Canada’s next move; while cooler economic data made a strong case for the central bank to hold its trend-setting interest rate in this week’s announcement, its next steps will rely firmly on inflation’s progress. With two more rate announcements scheduled by year-end – on October 25 and December 6, respectively – a strong CPI report could force through another hike. On the other hand, should softer economic growth persist, the Bank could stick to its rate-hold stance for the foreseeable future, providing much-needed stability for both borrowers and the housing market.