The Toronto housing market has been a topic of much discussion and analysis over the past few years. After experiencing a period of rapid price growth and high demand, the market has seen significant changes in response to economic and policy factors. As we move into 2023, there are many questions about what the future holds for the Toronto housing market. Will prices continue to decline? Will demand rebound or remain subdued? In this article, we will examine the latest trends and data from the Greater Toronto Area (GTA) housing market, as well as forecast what we can expect to see in the coming months.
Toronto Housing Market Trends for 2023
The Toronto Regional Real Estate Board (TRREB) has released its February 2023 stats, revealing a significant decline in home sales and new listings in the Greater Toronto Area (GTA) compared to the pre-rate hike levels of early 2022. However, TRREB officials note that buying intentions have picked up for 2023, suggesting increased demand for housing.
The decline in home sales and new listings in the GTA has resulted in the average selling price and MLS® Home Price Index (HPI) leveling off after trending lower through the spring and summer of last year. The average selling price for February 2023 was $1,095,617, down 17.9 percent compared to February 2022, while the MLS® HPI Composite Benchmark was down year-over-year by a similar annual rate of 17.7 percent.
TRREB President Paul Baron notes that home prices have dropped over the last year from the record peak in February 2022, mitigating the impact of higher borrowing costs. Many homebuyers have also opted to purchase lower-priced homes to help offset higher borrowing costs. The share of home purchases below one million dollars has increased substantially compared to this time last year.
However, the constrained supply of listings in the GTA is leading to increased competition between buyers, which is expected to eventually lead to renewed price growth in many segments of the market, particularly those catering to first-time buyers facing increased rental costs. TRREB Chief Market Analyst Jason Mercer highlights the need for new and innovative solutions to address the housing supply issue, particularly as Toronto approaches a June mayoral by-election.
One potential solution is the City of Toronto's initiative to allow duplexes, triplexes, and fourplexes in all neighborhoods citywide. This initiative could help to increase the housing supply and provide more affordable options for buyers.
As Toronto continues to experience record population growth in the years to come, an adequate and diverse housing supply will be critical to meet the demand. It will be interesting to see how the market evolves over the coming months and years, and what new solutions emerge to address the ongoing housing supply issue in the GTA.
Toronto Housing Market Forecast 2023
The Toronto housing market has seen significant year-over-year decreases in home prices, with an 18% decline in average GTA home prices in February 2023 compared to the same period last year. This trend can be attributed to the rise in prime rates, which soared from 2.45% to 6.45% in 2022, making it more expensive for potential homebuyers to borrow.
Looking ahead, it's difficult to predict precisely what will happen to the Toronto housing market shortly. However, given the recent increase in the average price of homes in the GTA, it's possible that the market could be starting to stabilize. The composite benchmark home price, which measures the price of an “average” home, registered its first increase since last spring's price peak, indicating a possible recovery.
Additionally, the Bank of Canada has paused its policy rate hike, which could lead to future rate cuts and potentially reinflate the housing bubble. However, given the limitations on housing development caused by zoning policies, it's possible that even free money might not be able to inflate another housing bubble in Ontario.
Overall, homeowners and potential buyers alike should keep a close eye on the Toronto housing market in the coming months to gain a better understanding of its trajectory. While it's too early to say whether the market will continue to stabilize or experience further declines, the recent increase in average home prices could be a promising sign for those hoping for a recovery.
Here is the summary of the Toronto housing market for Feb 2023.
- The average home sold price in the Greater Toronto Area (GTA) decreased 18% year-over-year to $1,095,617 for February 2023.
- Inventory shortage in the GTA housing market allowed a whopping 5.5% jump in average home prices.
- Yet over the medium and long term, legal changes in Ontario should prevent another bubble, as we saw between January and April 2022.
- Detached home average price decreased by 19.9% year-over-year to $1.44M.
- Semi-detached home average price decreased by 21.3% year-over-year to $1.07M.
- Freehold townhouse average price decreased by 16.3% year-over-year to $1.05M.
- Condo apartment average price decreased by 11.8% year-over-year to $705k.
According to Re/Max Canada's housing market forecast for 2023, the average price of a home in the Greater Toronto Area is projected to decrease by about 12 percent over the following year. According to Re/Max Canada's housing market forecast for 2023, the average price of a home in the Greater Toronto Area is projected to decrease by about 12 percent over the following year.
Amid rising interest rates and a looming recession, RE/MAX Canada is anticipating a modest decline of 3.3 percent in average residential sales prices across the country in 2023. The estimates are based on surveys of RE/MAX brokers and agents from coast to coast. In sharp contrast to 2022, most regions analyzed in the report will experience more balanced conditions in 2023 – a trend that’s already starting to materialize as a result of current economic conditions.
Canadian Consumer Trends
RE/MAX CANADA surveyed Canadians for their sentiments on the 2022 housing market and their expectations for 2023.
- 54% of Canadians said they feel confident that their financial situation will remain stable in 2023.
- 38% aren't confident in their financial situation, especially non-homeowners and lower-income households.
- 45% are concerned that further interest rate hikes will impact their ability to buy or sell a home in 2023.
- 67% of Canadians don't plan to buy a home in early 2023, and 62% don't plan to sell in that period, due to current market conditions.
- 54% of Canadians believe a two-year ban on foreign buyers will increase the supply of affordable homes for local buyers.
- 15% of Canadians are considering moving to another province in 2023 for more affordable housing. Non-homeowners are twice as likely to relocate.
Sources:
- https://trreb.ca/index.php/market-news/market-watch
- https://wowa.ca/toronto-housing-market
- https://blog.remax.ca/canadian-real-estate-outlook/
