2022 Year in Review & Market Outlook for 2023

The past year was an interesting time for real estate in Toronto, not necessarily for the highs and lows but because coming out of the pandemic we had to adapt to new challenges for buyers and sellers not seen in years. Rapidly rising interest rates, inflation, price adjustments, longer times to sell, change in power from sellers to buyers, and uncertainty among others.

Considering that in 2022 Toronto real estate prices hit their peak in the beginning of the year and then suddenly dropped off, the Toronto Regional Real Estate Board (TRREB) predicts the need for cautious optimism in 2023 with prices remaining flat early on and then increasing as the year progresses.

READ: TRREB 2023 Market Outlook & 2022 Year In Review

READ: TRREB 2022 Market Outlook & 2021 Year In Review

In last year’s report, TRREB predicted annual home prices would increase 12% in 2022 ($1,095,333 to $1,225,000). They were on track for the first five months of the year but what was unexpected was that the Bank of Canada would start rapidly increasing interest rates beginning in March. As a result, mortgages became more expensive and harder to obtain for buyers so prices dropped in turn and the market cooled, ending the year up only 8.6% for an average price of $1,189,850. Overall, still a strong year-over-year increase.

This year’s forecast is predicting that average annual home prices will drop for the first time in recent history by 4% from $1,189,000 in 2022 to $1,140,000 in 2023. TRREB predicts that prices will remain relatively flat in the first half of the year, but that competition between buyers in the latter part of 2023 will cause prices to increase by year-end. On a monthly basis, expect to see consistent price drops in January to April 2023 compared to 2022, when the market was at its peak towards the end of the pandemic.

The charts below show Toronto’s yearly average sale price and the number of transactions from 2019-2023’s projections by TRREB. As you can see, even though TRREB is predicting that overall prices will fall by 4% this year, they would still be up a total of 39.1% since 2019. Those are gains of almost 10% per year and that’s through a global pandemic.

Looking beyond the sales numbers, Ipsos (TRREB’s market research company) found through surveys and interviews that 28% of respondents said they would consider buying a home in 2023 (up 2% from 2022), 46% of first-time home buyers said they intend to purchase (up 7%), and 39% of homeowners said they would consider selling (up 4%). This speaks to the positive outlook the general public has for the housing market going into 2023.

There are other reasons to be optimistic for Toronto real estate this year. As immigration into Canada continues to grow, the GTA will continue to be the single biggest beneficiary of new people moving in who will looking for homes, both in the home ownership and rental markets. As we know, Canada and especially Toronto and Ontario specifically are already dealing with a large housing shortage of about 1.8 million homes nationally. All levels of government are taking measures to make new home construction easier and cutting much of the red tape surrounding this construction.  That said, this won’t happen immediately and pressure on buyers will continue for the foreseeable future supporting home prices. Builder’s also remain “cautiously” optimistic in the face of the new economic headwinds.  Demand for new condominium units is expected to remain consistent with current levels throughout much of the year. 

On the surface the sales numbers for 2022 don’t paint the nicest of pictures, but when you dig a little deeper and take a longer term perspective, we can see the Toronto housing market has been relatively stable and actually done quite well through the uncertainty brought on my the pandemic and resulting chaos. 2023 will be the year to hit the reset button on home sales and prices but by the end of the year we should be back on track going into 2024.

Commentary by Joseph Robert, Broker of Record