The Bank of Canada’s anticipated pause on interest rate hikes sets the stage for a better spring market for buyers and sellers, provided that there is enough inventory to satisfy demand
GTA Market Activity – January 2023
The average selling price in the GTA for January 2023 at $1,038,668, slightly lower than
December 2022 averages, while benchmark prices remain steady month-over-month, a trend
which has continued in the GTA since late summer.
The GTA saw 3,100 sales in January, slightly below December 2022 volumes, and down 44.6%
from the blistering pace of sales we saw last January. The sales total represents the second
lowest instance of sales since 2009. The only other time sales dipped to these levels was April
2020, which of course turned out to be an anomalistic low created by Covid uncertainty. The
2020 uncertainty for the real estate market was short-lived and sales rapidly increased all the
way to 15,652 by March of 2021, an all-time high. It is noteworthy that those purchasers willing
to come off the sidelines and enter the market were able to realize substantial equity gains since
April 2020.
Listings are still selling, on average, in less than one month.
Lack of Inventory Spurs Competition
New listings remained scarce in January. The lack of inventory is creating increased competition
for desirable homes, particularly in the low-rise category. Buyers who held off last year on
making a move are now competing for quality homes, and in some cases finding themselves in
multiple offer scenarios given the insufficient number of listings on the market. Sellers looking
to list their home in the remaining winter months may be pleasantly surprised by the attention a
well maintained, well priced home will receive in this current market.
“Home sales and selling prices appear to have found some support in recent months. This
coupled with the Bank of Canada announcement that interest rate hikes are likely on hold for
the foreseeable future will prompt some buyers to move off the sidelines in the coming months.
Record population growth and tight labour market conditions will continue to support housing
demand moving forward,” said Toronto Regional Real Estate Board (TRREB) President Paul
Baron.
If the volume of listings remains low, buyers, who are simultaneously feeling impatient and
encouraged by stabilizing interest rates, may create some modest upwards pressure on prices
on a month-over-month basis, particularly as we move into spring and more buyers come off the
sidelines after waiting out the market during last year’s interest rate increases.
Bank of Canada Announcement Provides Assurances to Consumers
On January 25th , in light of higher than anticipated employment numbers in December 2022,
The Bank of Canada raised its benchmark interest rate by 25 basis points, to 4.5%. While this
was the Bank’s eighth consecutive interest rate increase, the announcement was primarily
significant due to the Bank’s inclusion of forward guidance that it expects to hold off on future
rate hikes. Economists are already predicting that the Bank of Canada will turn its focus to
easing monetary policy by the end of this year. This shift allows consumers to once again rely
on mortgage interest rates remaining steady and with that, renews confidence that real estate
will not see the declines in value in 2023 that we saw in 2022.
“Home prices declined over the past year as homebuyers sought to mitigate the impact of
substantially higher borrowing costs. While short-term borrowing costs increased again in
January, negotiated medium-term mortgage rates, like the five-year fixed rate, have actually
started to trend lower compared to the end of last year. The expectation is that this trend will
continue, further helping with affordability as we move through 2023,” said TRREB Chief Market
Analyst Jason Mercer.
Current three and five year fixed mortgage rates are typically under 5%.
Timing the Market: Some Historical Perspective
While the cost of borrowing has gone up in the last year, the average price of properties across
the GTA has fallen from the record highs recorded last winter. This creates an opportunity for
wealth accumulation for those willing to make a move. As interest rates stabilize, the likelihood
that values move higher in the second half of 2023 increases, resulting in the potential for equity
increases for those willing to step to the plate while others continue to sit on the bench.
Aggregate values in the GTA are down approximately 20% from the peak, however, compared
to average home prices throughout 2020, current prices remain 16% higher over a two-year
span. The last time an opportunity like this presented itself in the GTA came during the 2017
market correction. In hindsight, it was an excellent opportunity to enter the market or for those
looking to move up in value or asset class. Property values in the GTA have increased 45% since 2017.
If you would like to find out what these statistics mean to you, or if you are curious to know how much your property is worth today or how much you can afford to buy, please reach out.
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