As forecast in December, the slumping resale market of 2022 continued into the first month of 2023. Compared to January 2022, sales of all property types declined by almost 45 percent. Due to the extraordinarily strong pandemic market early last year, on a year-over-year basis sales volumes will post substantial negative variances until at least April. By April 2022, increased borrowing costs had begun to slow the residential resale market with an unprecedented impact. Since March of last year, sales volumes and average sale prices have consistently declined as borrowing costs have increased.
In absolute numbers, 3,100 properties traded hands in January. Last year, 5,594 properties were reported sold. The decline, both in sales volumes and average sale prices, is universal, impacting all housing types throughout the greater Toronto Region. There were, however, variations in these declines. In the City of Toronto, sales declined by more than 46 percent and average sale prices declined by almost 15 percent. In the 905 Region average sale prices declined by almost 20 percent and sales softened by slightly over 42 percent. Sixty five (65) percent of the total sales volume (3,100 properties) took place in the 905, with the City of Toronto accounting for only 35 percent (1,098) of all sales.
The average sale price for the entire Toronto Region came in at $1,038,668, a 16.4 percent decline compared to January 2022’s average sale price of $1,242,407, which at the time, was an all-time high average sale price record. Due to the preponderance of lower-priced condominium apartment sales in the City of Toronto, the City’s average sale price came in lower at $987,000, a number reminiscent of the City of Toronto’s pre-Covid average sale price.
Although there were more properties of all types available for sale in January compared to last year, this increase was due to declining sales, not sellers flooding the market with properties for sale. Quite the contrary. At the end of January 9,299 resale properties were on the market for sale, 125 percent more than the 4,140 properties available last year. It should be noted that only 7,688 new listings came to market in January, almost 4 percent fewer than the 7,983 homes that came to market last January. With so few properties coming to market, supply, which has been the Toronto and Region’s perennial problem, will once again become a massive home-buying roadblock when sales volumes begin to improve.
Demand is still present in the market and there are signs that it is intensifying. It is being constrained only by high borrowing costs. Toronto’s much sought after eastern districts reflect the intensifying demand. Notwithstanding the prevailing high borrowing costs, all detached properties that came to market sold in 21 days – the average market average was 29 days – and at 100 percent of asking prices. Even more telling were semidetached property sales. All semi-detached properties in Toronto’s eastern districts sold in an eye-popping 18 days at sale prices 103 percent above asking prices. In fact, all semi-detached property sales throughout the City of Toronto took place in only 21 days and at 102 percent of asking.
The number of sales reported on a daily basis in the City of Toronto showed a marked increase after January 25th. On that day, the Bank of Canada announced its latest increase to be benchmark rate – 0.25 percent, taking the overall rate to 4.5 percent. More importantly, the Bank stated that its numerous rate increases since March of last year are reversing inflation and further rate increases may not be necessary. The moment potential buyers are convinced that rates are no longer increasing, the buyer inertia of the last 10 months will incrementally begin to dissipate.
Since February 2022, the average sale price in Toronto and Region has declined by more than 22 percent, to $1,038,668 in January 2023. The decline, coupled with the central Bank’s message that rates may have stabilized, with potential declines going forward, is the combination that will see the resale market reverse the course it has been on. The change, when it comes, certainly before the end of the first quarter, will see increased sales but with average sale price stability. Prices will not rise until borrowing costs decline substantially.
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Prepared by Chris Kapches, LLB, President and CEO, Broker, Chestnut Park® Real Estate Limited, Brokerage.