2022 Toronto Real Estate Market Outlook

/ Glenhome Real Estate/

Before I start this year’s summary, I wanted to answer one of the common questions that I am asked’ “When is the bubble going to burst”?  I am asked this or some variation of this. Firstly, I am at fault as much as anyone else for using metaphors especially when we read the so called “experts”.  The answer is that we aren’t in a “bubble”, we are in a supply demand economy where the demand far exceeds the supply and there is NO sign of that stopping.  Depending on what report you read, we are 1.5-1.8 million homes short of the demand in Canada and this number is only growing as we see more immigration and growth.  So the estimates for 2022 see further prices rising as they have basically since 2000 with no reason to stop.

2022 Market Outlook and 2021 Year in Review – SUMMARY

Below is a summary of the 28 page document that TRREB put out on February 3, 2022.  The link to the FULL DOCUMENT is available here

Demand for home ownership will remain strong throughout all of TRREB (GTA):

  • Total sales in 2022 is predicted to reach 110,000 which is a dip from 2021 but strong compared to previous years.

  • The average selling price for all home types will climb to $1,225,000, a 12% increase from 2021.

Key Findings:

  • The number of prospective buyers will dip, including first time buyers.

  • The number of current homeowners who want to sell will also go down

2021 Year in Review

In 2021 there were a number of record breaking months of sales.

Takeaways:

  • Average sale price was $1,095,475 – up 17.8% from 2020

  • A strong resurgence of condo sales

  • Total home sales reached 121,712, exceeding the previous record set in 2016 and up from 95,0666 set in 2020

What trended in New Homes:

  • Single family new home sales started strong in 2021 but lost steam later in the year with total sales being down 20% from 2020

  • Pre-construction condo transactions continue to soar with the City of Toronto and Durham Region leading the charge

2022 Market Outlook: Highlights and Key Drivers *

*Survey results from ipos

Demands for residential real estate in the GTA remained at or near record levels through the 2nd half of 2021. TRREB is forecasting another strong year for 2022.

As previously mentioned, home sales through TRREB will fall off to 110,000 but average sale prices will increase to $1,225,000 representing an approximately 12% increase compared to 2021.

There are a number of factors influencing this forecast:

  • Labour Market Recovery – positive impact

  • Immigration renewal – positive impact

  • As a result of the pandemic and historically low interest rates, many families purchased before they had planned to, thus “artificially” pushing sales volumes up in 2020 and 2021 which will catch up in 2022 pushing sales down – negative impact

  • Higher borrowing costs. The general consensus is that there will be three .25% interest rate hikes in the year (the first one might be .50%) – negative impact

  • Lack of inventory

    • Sales – negative impact

    • Prices – positive impact

Polling also suggested that home buyers who were VERY committed to buying in 2022 remain committed while those who are the fence may hold off for a year.

Further to this is an interesting fact about “first time buyers”.  It seems that the overall first time home buyer intentions seem likely to drop in 2022 compared to 2021 while in the “416” area code this percentage will actually go up.  This is likely a result of the resurgence of the condo apartment demand we experienced in the latter part of 2021.

New Home and Condo Sectors

  • Combined, 2021 new home sales were up 23% for the first 11 months of 2021 from 2020 and recording its third best year on record primarily thanks to the condo apartment market.

    • Condominium sales were up 50% from 2020 and, as stated previously, single family new homes started strong but tailed off to be about 20% less than 2020.

Conclusion

Toronto real estate market will be experiencing significant changes and it will likely see both a rise and a decline. The real estate market is one that depends much more on supply and demand as opposed to the supply and demand of jobs within the Toronto city limits or within the Toronto's suburban area. One of the factors that will have an outsize effect on overall real estate market is expected to be the increased availability of housing which will be coming with the rising of the property taxes in the Toronto city limits.