TRREB’s September GTA Data.

The fall market was off to a slow start following another interest rate hike of 75 basis points in early September. Seemingly, the Toronto real estate market continues its adjustment to the rapidly growing borrowing costs this year, and it may continue to do so for the rest of the year. I would be remiss if I didn’t point out some of the details in the current market environment that could play a role in where we are going from here.

Demand for hosing is being crushed by the Bank of Canada

The ongoing quantitative tightening has been quite successful at destroying housing affordability. Many buyers have been squeezed out of the market, to the tune of aggressive borrowing costs increases. First time home buyers especially, have been outpriced as this is the cohort that relies mostly on their cash savings for downpayments. This has been one of the major reasons for the rental rates to rally drastically this year – people need to live somewhere and if they cannot afford to buy – they rent.

On top of that, the Bank of Canada has promised to raise rates again this October. The buyers who are able to afford to buy in these market conditions, are hesitant to make any decisive moves, preferring to wait and see how the market is going to react to further attempts by the central bank to suppress the economy. The anticipation that the markets could bottom out more is prevalent amongt these buyers and they would prefer to see if they can get better deals as the time goes by.

Sellers have reacted to the quantitative tightening – by reducing inventory

On the other hand, the supply of housing continued to drop this September. Many property owners are unwilling to list their homes for sale due to lower demand. As a result, there was a total of 5,038 sales taking place in the City of Toronto and the GTA combined. This number has marked a 44.1% reduction in sales year-over-year. There were 11,237 new listings making it on the market (a 16.7% drop year-over-year), which is uncharacteristic to the beginning of a fall market. In fact, this was the lowest number of new listings reported in a month of September in 20 years. This is especially astounding considering the fact that there were a lot less housing units in 2002 in general.

It is not unlikely that the shortage of supply could imply that the more desirable areas could swing back into the seller market territory. Anecdotally, I am already seeing this trend taking effect with some listings in areas such as Leslieville, Roncesvales and Trinity Bellwoods attracting 10 or more offers on an offer night.

The average sale price across Toronto and the GTA has been hovering just under $1,100,000 since the summer of this year, suggesting that the housing prices have found some support at that level.

Toronto real estate market – condos continue to outperform all other property types

In the City of Toronto, condos continue to outsell any other asset type. In fact, Toronto condos have been the most sold asset type every month of this year. In September, there was a total of 875 condos sold, followed by detached homes (497 sales) and semis and townhouses, each coming under 200 sales. The average condo price is currently $769,058 which is an increase of 4.4% month-over-month and 3.4% year-over-year.

The GTA real estate market – Detached homes are leading the pack

While the demand for detached homes has cooled in the big city, they are still a hot commodity in the GTA. There was a total of 1,837 home sales taking place with an average price dropping to $1,310,639, a 9.5% drop year-over-year.

This significant price dip is a clear motivator for the buyers to start hunting down a property to purchase. The higher demand for discounted detached homes outside the boundaries of Toronto is certainly appealing and could boost the demand for this asset type. On the other hand, many homeowners would prefer to wait to list their homes until a more favorable economic conditions. This situation could create a more competitive environment in the GTA markets for the buyers.