I’ve been fortunate enough to guide my clients through eight different market corrections, but 2022 was certainly one of the most interesting years I’ve experienced in my 40 year career! The Bank of Canada’s aggressive approach to curbing inflation, by raising the overnight rate by 4.0% over nine months, placed a serious damper on homebuying activity in the Greater Toronto Area (GTA). There were 75,140 sales reported through the MLS system in 2022 down 38.2 per cent compared to the 2021 record of 121,639. While the average price for the entire market is up 8.6% from a year ago, it does not tell the whole story as we saw prices rapidly rise 25% in Q1, then fall by almost an equal amount in Q2. It does appear that prices have levelled off in the second half of 2022, which has given me good confidence in the market ahead and suggests we are either at the bottom of the market, or close to it.
The luxury market overall has held up relatively well, with sales over $2 million down just over 18 per cent year-over-year, considering sales for the entire market were down 38.2%. The average price for a detached house in Central Toronto in 2022 was $2,659,517.80, up 5% from 2021. Condos in Central Toronto sold on average for $827,832.75, up 10% from 2021.
It’s clear that the rapid rise in interest rates caused a shock to consumers and has made people nervous and pause, resulting in a dramatic reduction in transactions. While buyers wait on the sidelines, inventory levels are way down because sellers too have taken a wait and see approach. Though in a few rare cases I am seeing a lowball offer and great deal, for the most part sellers are being patient and buyers are frustrated that they can’t find anything to buy!
So what’s in store for 2023 and beyond?
Stability has been top of mind with today’s buyers and sellers and it does seem like we are starting to get some. As mentioned earlier, prices have been fairly flat for the last six months. The limited inventory levels, largely responsible for the run-up in housing values over the pandemic, continue to persist throughout much of the 416 and to a lesser extent, the 905, keeping housing values on an even keel. Consumers are getting increasingly comfortable with higher interest rates and as a result, I believe we will start to see more inventory come to the market, which will result in more transactions, and likely greater price flexibility.
Though inventory will rise, we still have a dramatic housing shortage. Our immigration target to add approximately 1.45 million new Canadians by year-end 2025, most of whom will settle in the Greater Toronto Area, will put a further strain on prices. Given that approximately 60 per cent of immigrants are admitted in the economic class, the future bodes well for Greater Toronto housing market. We know that economic growth will be tempered in 2023, but life events will continue to occur, prompting the sale or purchase of real estate.
While I am expecting prices to be fairly level for the year, I do believe that the lowest inventory period will be the first three months of the year as households continue to adjust to the new reality and sellers wait for the spring market. Consequently, this should be the most opportune time for sellers as they face very little competition and met with buyer’s armed with annual bonuses and New Year’s resolutions.
If you would like to learn how our clients reaped values well beyond the market or merely wish to discuss the year ahead and the opportunities I see in more detail, please don’t hesitate to reach out to me or anyone on my talented team. We’re never too busy to talk real estate.
Wishing you a happy and healthy 2023,
Barry
