What's next for Toronto's once-sizzling housing market?
Sales activity in the city is continuing to decline significantly
Toronto’s housing market took another tumble in September, with new figures from the Toronto Regional Real Estate Board (TRREB) revealing that home sales fell by 10% over the previous month – and were down a stunning 44% compared with the same time last year.
Home prices and sales activity in the city surged during the first two years of the COVID-19 pandemic, but that market boom is fading rapidly into the distance as a marked cooldown continues to grip Toronto and its suburbs.
The composite benchmark price of a home in the Greater Toronto Area (GTA) is still eyewatering, coming in at $1.08 million, although that’s down 4.3% from last September.
It’s important to note that year-over-year activity in the housing market is being measured against 2021 figures that shattered all records in Toronto and beyond, said TRREB president Kevin Crigger (pictured top).
He told Canadian Mortgage Professional that last year’s sky-high sales volume and scorching price appreciation probably accounted for such striking yearly declines this September.
“I think the reduction in overall transaction volume is being compared against truly a record year,” he said. “So that’s one thing for context that I think it’s important to look at [although] certainly it represents a slowdown in the market in terms of number of transactions completed.”
While it might be assumed that such a significant cooldown would bring some much-needed supply and new listings to Toronto’s housing market, it seems the opposite is true. Amid red-hot sales activity in September 2021, new listings totalled a robust 13,494 – but that figure slipped by 16.7% last month, coming in at 11,237 properties in a sure indication that the city’s supply scarcity shows little sign of easing.
That’s a trend that could bode poorly for the market’s future, according to Crigger. “The interesting part is the slowdown in new listings and the decrease in new listings coming to market,” he said. “As of now, sales are accounting for a larger percentage of new listings – which, if the trend continues, will obviously create tighter market conditions and ultimately put upward pressure on prices.”
Many housing markets across Canada aren’t expected to pick up the pace again anytime soon, with a recent analysis by RBC Economics indicating that Ontario and British Columbia – two provinces that witnessed some of the most intense market activity and price growth after March 2020 – are likely to see significant downward pressure on home prices.
Still, it remains to be seen how activity will play out in the Toronto market for the remainder of the year. “I think we’ll see how October numbers present, because October tends to be more active than September when you look at traditional markets,” Crigger said.
“Certainly, despite a large number of people taking the wait-and-see approach and obviously substantial increases to mortgage rates, we’re still seeing a market that is quite tight on the supply side. And we’re seeing people effectively stay in place.”
Another interesting trend from the recent TRREB statistics, according to Crigger, was that fewer people in the GTA appear to be upgrading or moving to larger homes, with activity most prominent near the lower end of the scale.
“If you look at the decline in average price and the increase in the home price index, one thing that’s highlighting is [fewer] of the move-up transactions are occurring,” he said, “so less of the discretionary purchases where people are going to larger homes and larger property. It’s primarily, or most active, in more entry-level price points.”
Canada’s other most notorious city for runaway sales activity and price growth, Vancouver, also posted a recent sizeable decline in sales.
The Real Estate Board of Greater Vancouver revealed that home sales dipped by 46% year over year, and 10% on a monthly basis, in September, with that level also coming in almost 36% lower than its 10-year September average.
Still, inventory in Vancouver’s housing market is ticking upwards, coming in at 9,971 homes in September – 3% over the August total and 8% year over year.