October 2023: It's Not as Straightforward as it Seems

“How’s the market these days?” This is by far the most common question I get asked in conversations and usually I have a straightforward answer. However, despite promising price trends the mood in the Toronto real estate market as we head into the 2023 holiday season could best be described as subdued. Contradictory it may seem but with record-high borrowing rates and no immediate relief in sight, Canadians are concerned about what comes next. So, how’s the market these days? There’s no straightforward answer – it depends on the property and the neighbourhood.

Overall, prices in October 2023 in the City of Toronto were up 3.5% from last year across all home types but the number of sales was down -5.8% – a potential concern if the trend continues. Record population growth and competition between buyers helped maintain price levels but the number of new listings last month outweighed sales 3 to 1, a sign supply may be outweighing demand in the near term. What we know for sure is properties are staying on the market longer with no guarantee of selling at the expected market rate. Not great for sellers but good for those considering a purchase.

Why I say the market is not straightforward these days is because these city-wide trends don’t necessarily apply to different property types and neighbourhoods, particularly in Central Toronto. Detached and semi-detached houses and townhouses are actually doing quite well for the most part, all appreciating year-over-over, with condos being the only property type lagging behind last year’s prices (-1.5%).

The standout though is Central Toronto, where detached homes are up 8.3% and 11.0% on an annual and monthly basis respectively and the number of sales has not fallen. This makes sense from what we’re seeing on the ground as the luxury market has been quite robust lately, seemingly not impacted as much by monetary policy and with a scarcer number of high-end properties driving demand. Looking at the graphic below, ‘House & Condo Prices’ you can see the green symbols are concentrated in Central Toronto neighbourhoods indicating where prices have gone up since the month previous.

After, “How’s the market these days?” I’m always asked, “Where are things headed?” If only I had a crystal ball… Consensus in the industry is that once the Bank of Canada starts to ease interest rates the housing market will fiercely rebound in turn. When that may be is cause for speculation with some saying as early as next year while others expect 1-2 years. What seems to be certain is that Canadians should not expect the near-zero interest rates we grew accustomed to return for some time, if ever.

According to a recent poll by Royal LePage, 31% of all mortgage-holders in Canada say their lending agreement is set to renew within the next year and a half, about 3.4 million Canadians. Of these, about one quarter are on variable-rate mortgages that may see their payments double or even triple due to higher rates. The poll reports the majority of people are saying they are not concerned about making their mortgage payments despite the higher rates. We’ll have to wait and see if this is the case. In the meantime, speculators are keeping a close eye on how the situation develops expecting/hoping for property owners to have to sell at a discount because they can’t keep up with their new payments.

The mood in the market may be subdued, but it usually is as the weather starts to turn and the days get shorter. Home prices are strong and no one expects the demand for property in the city to wane considering the amount of people coming to Canada and the GTA. We will have to get used to higher mortgage payments but Toronto continues to be an incredible place to live and invest in. As always be careful and take your time when looking at your options, especially in this uncertain market.


Market Commentary by Joe Robert, Broker of Record & JR Robert, Sales Representative

Sources

TRREB September 2023 Market Watch Report: Read Here
Royal LePage Market Trends Report - Canadian Mortgages: Read Here