Navigating the Greater Toronto Area Real Estate Market in a Shifting Landscape

When it comes to the real estate market in the Greater Toronto Area (GTA), there's a lot to consider. The impact of high borrowing costs, rising inflation, uncertainty regarding the Bank of Canada's future decisions, and slower economic growth have all played a role in shaping the GTA's real estate landscape. In this blog post, we'll explore the current state of the GTA real estate market, what the experts are saying, and how you can navigate this shifting environment.

The GTA's Real Estate Market in September 2023

In September 2023, the GTA real estate market faced some challenges, with home sales experiencing a 7.1% decline compared to September 2022. This dip was particularly noticeable in the sales of ground-oriented properties, including semi-detached houses and townhouses. Additionally, on a month-over-month seasonally-adjusted basis, sales saw a slight decrease.

Rising Listings and Prices

Despite the drop in sales, there was good news for potential buyers. New listings were up significantly compared to September 2022, which had seen an exceptionally low number of listings. Furthermore, the number of listings continued to trend upward on a month-over-month seasonally adjusted basis.

For those who are concerned about affordability, the MLS® Home Price Index (HPI) Composite benchmark showed a year-over-year increase of 2.4%. The average selling price also saw a three percent rise over the same period. On a month-over-month seasonally-adjusted basis, both the average selling price and the MLS® HPI Composite benchmark showed a minor decrease of less than one percent.

Short and Medium-Term Outlook

TRREB President Paul Baron provided insights into the short and medium-term outlook for the GTA housing market. While borrowing costs are expected to remain high until mid-2024, there's a consensus that they will gradually decrease afterward. This suggests that the second half of the following year could see a notable uptick in demand for ownership housing. Lower interest rates and a growing population are expected to drive this increase in buyers.

Challenges and Calls for Change

One noteworthy challenge is the affordability for first-time buyers. TRREB's annual consumer polling indicates that approximately half of prospective homebuyers in Toronto are first-time buyers each year. However, the average price of a condo apartment in Toronto now exceeds $700,000. Despite this, the first-time buyer exemption threshold for the City's upfront land transfer tax has remained at $400,000 for fifteen years.

TRREB CEO John DiMichele commended the Toronto City Council for requesting a report on a more appropriate exemption level. He stressed the importance of aligning housing and taxation policies to address the ongoing housing crisis.

Conclusion: Navigating the GTA Real Estate Market

As the GTA's real estate market faces various challenges, it's essential to stay informed and be aware of both short-term and long-term trends. While high borrowing costs and economic uncertainties pose challenges, there are opportunities for buyers, especially in the second half of 2024 when interest rates are expected to trend lower.

Moreover, advocacy for policy changes, like updating exemption thresholds to make housing more accessible, is crucial to ensuring a fair and balanced real estate market in the GTA. With all these factors in mind, prospective buyers and sellers should stay informed and consult with experts to make well-informed decisions in this ever-evolving market.

August 2023 Market Stats

In this article, we'll delve into the August 2023 real estate market statistics and explore the factors that influenced these trends. From increased borrowing expenses to ongoing economic uncertainty and decisions made by the Bank of Canada, we'll dissect the data to gain a better understanding of what's happening in the housing market. Let's start by examining the key highlights.

Home Sales Decline in August 2023

Increased borrowing expenses, ongoing economic uncertainty, decisions made by the Bank of Canada, and limited listing availability led to a decline in home sales in August 2023 when compared to the same month in 2022. During this period, the average selling price remained relatively stable. When considering monthly adjustments for seasonal factors, both sales and the average price experienced slight declines

Greater Toronto Area Statistics

In August 2023, REALTORS® in the Greater Toronto Area recorded 5,294 sales, marking a 5.2 percent decrease from August 2022. However, there was a positive development in new listings, which saw a 16.2 percent year-over-year increase, offering some relief in terms of supply. Nonetheless, when looking at year-to-date listings, there remains a significant decrease compared to the same period in the previous year. On a seasonally adjusted basis, sales showed a marginal one percent month-over-month decline when compared to July 2023, while new listings experienced a slight 1.3 percent increase compared to July.

Stability in Average Selling Prices

"During the summer, we witnessed more balanced market conditions compared to the tighter spring market. Consequently, selling prices remained relatively stable, hovering around last year's levels and showing a slight dip compared to July. The increase in interest rates, which resumed in May after a pause in the winter and early spring, necessitated adjustments from many buyers to meet higher monthly payment requirements. Notably, not all sellers chose to accept prices lower than their expectations, leading to a reduction in the number of sales," explained TRREB Chief Market Analyst Jason Mercer.

In terms of statistics, the MLS® Home Price Index Composite benchmark for August 2023 demonstrated a year-over-year increase of 2.5 percent. Similarly, the average selling price experienced an uptick, albeit a modest one, of less than one percent, reaching $1,082,496 over the same period. On a month-over-month, seasonally adjusted basis, the MLS® HPI Composite benchmark remained largely unchanged, while the average price declined by 1.6 percent.

Impact of Interest Rates on Affordability

"As higher interest rates have unquestionably affected affordability, the anticipation of increased taxes will additionally strain households' financial positions, particularly younger buyers who may have limited savings. As the City of Toronto deliberates raising the municipal land transfer tax (MLTT) rate for properties exceeding $3 million as a source of revenue, it should also contemplate offering support to first-time homebuyers grappling with the challenge of entering the market. Adjusting the tax rebate threshold to align with today's elevated home prices could be a viable solution," suggested TRREB CEO John DiMichele.

Tactics and Trends in Home Listings

On a side note - Over the past month, We’ve observed an increasing number of homes listed for sale at notably aggressive prices. In certain instances, sellers opt to list their homes with artificially low asking prices as a tactic to draw in multiple buyer offers. However, when the offer date arrives and they receive multiple offers, the sellers often reject all of them because none meet their price expectations. Subsequently, these sellers relist their homes at the desired price, resulting in their properties languishing on the market for weeks as buyers are unwilling to meet those price demands.

While some sellers are gradually reducing their asking prices, others are taking their homes off the market temporarily, with plans to relist them in September. Although this is a common approach among real estate agents during the summer months when buyer activity typically slows, it remains intriguing to see how effective this strategy will be this year, given potential shifts in the market beyond the usual seasonal patterns.

The Unique Challenges of 2023

The uniqueness of this year stems from a changing market influenced by today's significantly higher interest rates. Some buyers are hitting the pause button because they find it increasingly challenging to afford a home at the current interest rates, especially when undergoing stress testing for a mortgage at around 8%.

Source: Market Watch

For the latest updates and in-depth analysis of real estate trends, stay tuned to Market Watch.

Get in Touch with Us

As always, we are here to guide and educate all our clients. If you have any questions or need assistance navigating the real estate market, don't hesitate to reach out to us. We're just a text, email, or phone call away!

GTA REALTORS® Release May 2023 Stats

In May 2023, the housing market in the Greater Toronto Area (GTA) demonstrated continued improvement in terms of sales. However, the supply of available homes for sale failed to keep pace with the demand for ownership housing. The proportion of sales compared to new listings increased significantly compared to the previous year, indicating intensified competition among buyers. As a result, the average selling price rose to nearly $1.2 million last month.

Paul Baron, President of the Toronto Regional Real Estate Board (TRREB), expressed concern about the housing supply issue, noting that despite positive policy changes, governments have been falling short in this area for some time. Ipsos polling revealed that City of Toronto residents rated the Council poorly in terms of housing affordability and identified the lack of supply as a major problem. This issue extends beyond Toronto and persists throughout the Greater Golden Horseshoe region. If housing supply fails to catch up with population growth, it could impede the economic development of the region, leading people and businesses to seek alternatives elsewhere to reside and invest.

According to TRREB, GTA REALTORS® reported 9,012 sales via TRREB's MLS® System in May 2023, marking a 24.7 percent increase compared to May 2022. However, new listings decreased by 18.7 percent during the same period. When seasonally adjusted on a month-over-month basis, sales rose by 5.2 percent compared to April 2023.

TRREB Chief Market Analyst Jason Mercer highlighted that the demand for ownership housing has significantly risen in recent months. Many homebuyers have adjusted their housing preferences due to higher borrowing costs and are reentering the market. Additionally, robust rent growth and record population expansion resulting from immigration have also contributed to increased home sales. Insufficient listing supply relative to sales has led to upward pressure on selling prices during the spring season.

In May 2023, the MLS® Home Price Index (HPI) composite benchmark decreased by 6.9 percent compared to the previous year but increased by 3.2 percent on a seasonally adjusted monthly basis compared to April 2023. The average selling price was $1,196,101, representing a slight 1.2 percent decline compared to May 2022. However, on a seasonally adjusted monthly basis, the average selling price rose by 3.5 percent compared to April 2023.

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