TRREB’s March GTA Data.
Toronto, April 8th, 2022
By Ivan Kalinin
Real estate market in Toronto: price dip signals a balanced market
Real estate market in Toronto and the GTA has been scolding hot for almost 2 years. During these 2 years, like a broken record, I have been repeating the same real estate market reports, where there were no good news for the buyers.
I applaud the endurance and the determination of all those who have been trying to get into the market for the past 24 months. Putting up with a fierce competition, participating in bidding wars and dealing with a shortage of inventory is not easy. Especially, when that inventory while already extremely limited, was disappearing in days and sometimes hours. This would discourage anyone trying to enter the market.
My friends, I am looking at the real estate market in Toronto today and I am finally able to say – I have good news for the buyers! Toronto Real Estate Board released their numbers from March and it looks very promising for those who are looking to make a purchase in the GTA.
3 factors that affected the real estate market in Toronto in March
According to the numbers published by the Toronto Real Estate Board, the market has entered a balanced territory. It is important to make a distinction here and emphasize that when the market is balanced, this doesn’t mean that the prices are dropping.
The prices are not dropping, the buyers are still here, no one ran out of money and/or left the country. When the market is balanced this only means that there is more inventory available, the buyers are not buying as aggressively as they used to and while the prices are still increasing, they do so at a slower pace.
The 3 factors that contributed to that were the rising interest rates, increased inventory and the promise by the government to increase the Foreign Buyer’s Tax. Let’s take a look at each of these in more detail:
- Rising Interest Rates: the brutal market conditions that we have become accustomed to needed to be dealt with in order to avoid a market crash. Let’s be honest, this price trajectory wasn’t sustainable long term and so the Bank of Canada had to intervene. The interest rate has been bumped up .25 in March, but it was no secret that this wasn’t the end of it. There were two reasons why the buyers became a bit more hesitant to participate in the market this spring. First, some buyers got affected by the change and were not able to afford the home of their choice anymore. Second, and in my opinion the main reason, is that the majority of the buyers, understandably, wanted to sit back and watch what would happen with the real estate market in Toronto after these changes would have taken place. This hesitation is present every time the Bank announces interest rate hikes in advance. On top of that, another hike is anticipated sometime in the middle of April, this time at a steeper .5 point.
- More Inventory: there was a significant amount of new inventory coming to the market after the Family Day in February and then again after the March break. There are finally more options to choose from and this is what we all desperately needed.
- Foreign Buyer’s Tax: when the Foreign Buyer’s Tax (or Non-Resident Speculation Tax) was first introduced in 2017 it was one of the major contributors to the market cool down that year and in 2018. The other 2 were the stress test (perhaps the main contributor) and multiple interest rate hikes in the ensuing months. In order to assist Canadians to be able to purchase homes without the interference of foreign speculators, the provincial government had increased the NRST from 15% to 20%. Whether this is a factor that would deter foreign investors from purchasing properties here remains a good question. The province desperately needs more residential units, but the process of obtaining development and building permits remains to be outdated and clunky. There is an argument to be made that instead of focusing on reducing demand, the province should make the development approvals easier to obtain, in order for the developers to be able to increase supply.
Real estate market in Toronto in March at glance
March 2022 numbers are showing that while the prices are still increasing, there was a slight dip from February to March. This signals a potential shift towards a quieter market. Even though there are still fewer listings year-over-year, there is some improvement from February. The same is observed in the amount of sales in March.
In March there were 20,038 new listings on the market, while 10,955 sales took place, positioning the sales-to-new-listings-ratio at 55%. It’s the first time the market has seen this balance since before October 2020.
As discussed above, with the rising interest rates it is no surprise that the buyers prefer to sit back and watch the market a little bit before making purchasing decisions. This is not to say that the market has been slow. In fact, the sales jumped 20% from February, which made last March the third best March on record and second best Q1 in history.
The slight bump in new listings in March, although encouraging, still doesn’t solve the issue with the low supply of housing. In fact, there were still 12% less listings on the market when compared to March 2021.
What does this mean for the buyers
The steep price surges that we have become accustomed to in the GTA are starting to moderate. Usually there is a tendency in the spring market for the prices to rally, but not this year. Last March the average prices dipped about $35,000, from $1,334,544 to $1,299,894.
All this is looking very positively for the buyers, who are are still facing some competition, that competition is not as fierce as it was in the past 24 months. If the pace of the market moderates further, this could mean a great spring and summer seasons to make a purchase.
As a personal opinion and from experience of observing the market undergoing changes in policy in the past, I am both excited for the buyers perplexed at the same time. Historically, the real estate market in Toronto and recently in the GTA have been experienced a tremendous amount of demand. Each time headlines about the market conditions easing up were followed by another buying frenzy and the prices rallies. Today’s market slowdown may not stay here for too long. If you are looking to purchase a property this year, this spring may be a good time to do so, but keep in mind that as more news come out about the market cooldown, the more buyers will feel encouraged to go back and start buying again.
TORONTO REAL ESTATE MARKET STATS
TORONTO REAL ESTATE MARKET STATS
If you like talking real estate half as much as I do and are going to participate in the market in 2022, come chat and have a coffee. And if you are looking for a property as an investment, remember our super-popular private investment tours now booking in early 2022. Click here to book.
Ivan Kalinin is a sales agent at Key Toronto Real Estate Group. Zoocasa Realty Inc. – Brokerage independently owned and operated, He can be reached at 416 858 8085. Not intended to solicit clients already under contract.