Jan 5, 2023
Toronto region home sales down 48.2 per cent in December from previous year
Higher rates hit Toronto home prices again
Home sales in the Greater Toronto Area (GTA) fell sharply in December 2022 when compared to the previous year, as heightened interest rates weighed on the housing market, according to a new report.
In total, 3,117 sales occurred in the GTA during the month of December, marking a 48.2 per cent decline from the previous year, according to a release from the Toronto Regional Real Estate Board (TRREB) on Thursday. New listings totalled 4,074 during the month, coming in 21.3 per cent lower year-over-year.
The average selling price in the GTA during December was $1,051,216, down from $1,157,837 in the previous year, which marked a 9.2 per cent decrease.
The Bank of Canada raised interest rates seven times in 2022, bringing its policy rate to 4.25 per cent, in an effort to bring inflation back down to its two per cent target.
The GTA housing market experienced an “adjustment” in 2022, TRREB said in the release, as issues of affordability stemming from limited supply were worsened by heightened interest rates.
“Following a very strong start to the year, home sales trended lower in the spring and summer of 2022, as aggressive Bank of Canada interest rate hikes further hampered housing affordability,” TRREB president Paul Baron said in the release.
Home prices began to level off during the late summer months, which might indicate the market adjustment could be nearing its conclusion, Baron said.
“With no relief from the Office of Superintendent of Financial Institutions (OSFI) mortgage stress test or other mortgage lending guidelines including amortization periods, home selling prices adjusted downward to mitigate the impact of higher mortgage rates,” Baron said.
Total home sales in the GTA hit 75,140 in 2022, the release said, a 38.2 per cent decline from the 2021 record of 121,639. The number of new listings during the year was 152,873, down 8.2 per cent from the previous year of 166,600 listings.
Despite falling home sales and total listings, the release said average prices increased during the year based predominantly on market strength at the beginning of 2022. Average selling prices increased by 8.6 per cent to $1,189,850 in 2022 from $1,095,333 in 2021.
“While home sales and prices dominated the headlines in 2022, the supply of new listings continued to be an issue as well. The number of homes listed for sale in 2022 was down in comparison to 2021. This helps explain why selling prices have found some support in recent months,” Jason Mercer, TRREB’s chief market analyst, said in the release.
Supply constraints have also had fallout effects on the rental market, Mercer said. Renting has increased in popularity amid the current high interest rate environment he said, which has contributed to tighter market conditions and “double-digit average rent increases.”
Mercer said in a television interview with BNN Bloomberg Thursday that a slow municipal regulatory process for new developments has been a long standing issue, which has contributed to a lack of supply.
“If you look at the development approval process and the number of years to a decade and beyond it can take to get new developments off the ground and people actually getting keys in hand and into new homes. That's been a problem over the last decade, both on the ownership side of the market and on the rental side of the market,” Mercer said.
THE YEAR AHEAD
The GTA’s housing market is likely to be impacted by two opposing forces in 2023, John DiMichele, the TRREB chief executive officer, said in the release.
“On the one hand, we will continue to feel the impact of higher borrowing costs. On the other hand, record levels of immigration will support demand for ownership and rental housing, while we struggle to come to terms with a housing and infrastructure deficit in the Greater Golden Horseshoe,” DiMichele said.
Amid high levels of immigration, Mercer said the GTA will continue to be the greatest beneficiary.
“That’s going to be the real story in 2023 and 2024, is that give and take on the one side we're going to have the lingering effects of borrowing costs. But on the other side we’re going to be looking at housing hundreds of thousands of people in Canada and a lot of those right in the GTA and some of them will choose to rent, but a lot of them will eventually choose to purchase a home,” Mercer said.