GTA October 2022 Real Estate Market Update
Tags: GTA RENTAL MARKET, TORONTO REAL ESTATE, VAUGHAN REAL ESTATE, Mark crash, MARKET CORRECTION
2022 has definitely been an interesting year from an economic and interest rate perspective. We experienced crazy demand for real estate in the first two months of the year that resulted in aggressive bidding wars. But as mortgage rates started to increase the real estate market started to cool off and we have experienced sale price drops since the high of February 2022 due to buyers jumping to the sidelines hoping for a market crash. From March to July we experienced sale price corrections however in the last 3 months we are seeing prices flatten out due to a slowdown in listing activity.
However, the rental market has experienced a huge increase in demand due to buyers deciding to hold off on purchasing and employees and students returning to GTA the rental market is now very tight and rentals are now also experiencing bidding wars. As a result, rents in the GTA experiencing a substantial increase over the past year.
October Real Estate Sales Update
The downward trend in real estate prices that we experienced in the spring market has flattened out over the past 3 months. This is due to the number of listings also dropping off year over year. Although year-over-year prices are down 5.7% compared to October 2021, prices have remained relatively flat compared to September 2022 when the average sale price in the GTA was $1,086,762, the number of new listings is down 11.6% and the number of sales is down 49.1% compared to October 2021.
It is hard to predict what the balance of 2022 or early 2023 will look like but we know that in the long-run demand will continue to be strong. The Federal government recently announced that it is aggressively increasing the number of immigrants coming to Canada over the next 3 years to support employers with employee shortages. In addition, developers are not keeping up with building new housing due to a shortage of construction supplies and labor and also given the current economic uncertainty.
Listing inventory continues to be at an all-time historic low at levels not experienced since 2010 which will most likely result in a slowdown in sale price drops. Home prices in the GTA have found support in the last 3 months due to the price drops in the spring and early summer market which has mitigated or balanced off the spike in the mortgage rates.
The recent October 26th Bank of Canada message implied that they are reaching the end of the overnight rate increases and that rate hikes may cease in early 2023. There are also some predictions that the banks may start to drop the fixed rate mortgage rates moving forward.
Average Sale Price Trends Over the Past 4 Years
We are all hearing a lot of gloom and doom in the media recently but is it really as bad as the media makes it out to be?
I agree that the last two and a half years have been a little crazy. Back in March of 2020 many of us in real estate expected the housing market to dramatically cool down but we actually experienced the reverse. Demand for housing actually increased as families started to work and study from home and hence they quickly realize they needed more space. However, the drastic increase in demand for housing wasn’t directly related to the pandemic as we started to see a dramatic increase in demand in the fall of 2019 and many properties were already selling in bidding wars in the fall of 2019.
I strongly believe that what we experienced in the spring and early summer was a healthy correction and I do not believe that we are going to experience a market crash. We are experiencing population growth through immigration and builders are not keeping up with the construction of new housing. Demand for housing will remain strong which will continue to place pressure on prices once inflation subsides. The current economic challenges that we are facing are nothing compared to past recessions or economic slowdowns. The inflation that we are experiencing is directly related to construction supply challenges due to lockdowns and manufacturing slowdowns and more recently the Ukraine war. Plus given that we were in lockdown for almost 2 years and not spending money we now have money to spend but are still experiencing supply issues hence the pressure on prices.
So let’s take a look at the average sale prices in the month of October over the past 4 years. If we compare October 2022 prices to October 2019 prices across the 6 GTA regions - prices are still up between 24.10% to 46.59%. If we were to experience a market crash we still have a long way to go. I personally believe that we are experiencing a healthy market correction because the crazy bidding wars that we experienced in January and February of this year were not sustainable. I was personally a little horrified by what happened in the first two months this year and am grateful for the correction in the market.
Is there still possibly some room for price drops – possibly? But the increase in the population due to immigration and the slowdown in construction will continue to put pressure on prices.
Great Opportunity for Buyers
The good news is that the market has definitely slowed down and buyers can once again negotiate prices and include conditions such as inspection, and financing conditions to protect themselves.
The price decreases are starting to flatten. I caution buyers that are waiting to see if the market will “crash”. Trying to time the market can be dangerous as by the time buyers realize that the market is not crashing it will be too late.
The economic fundamentals do not point to a real estate market crash. If buyers sit on the sidelines for too long they may very quickly realize that the market has bounced back and possibly get further priced out of the market. I have seen this in 2017/2018 when many buyers informed me that they would wait for the market to crash and by the time they realized that the market wasn’t crashing they were priced out of the market.
My advice is to buy what you can manage and continue to save and build equity rather than paying a landlord’s mortgage.
If you are a first-time buyer or an investor it is a good time to get more active in looking for that perfect property.
Buy and sell your home or recreational property with Sylvia Smith. She specializes in residential and recreational real estate within the Greater Toronto Area, Parry Sound, and Muskoka. Whether you are a first-time buyer, an investor or you are looking for a cottage property, Sylvia Smith provides a seamless experience and is committed to making your real estate dreams come true. Combining her passion for real estate, and a tenacity for protecting client interests and providing integrity and client service sets her apart. Reach out if you have any questions or are thinking of buying and selling.