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Toronto Real Estate Market Update

It has been quite the ride this year! I took a quick look back at a few micro markets to help put into context what really transpired at the start of the year (3 month period):

Brampton Semi-Detached – November 2021 – February 2022  +21%

Whitby Detached – November 2021 – February 2022  +26%

Aurora Detached – November 2021 – February 2022  +11%

Toronto Detached – November 2021 – February 2022  +15%

Toronto Condo – November 2021 – February 2022  +15% 

A clear indication that the combination of low interest rates and very low supply, combined with high consumer confidence drove prices well above the historical annual price increase of 7% in a short 3 month period! With inflation not giving up, reaching a recent peak of 6.8% in April, driven by supply chain constraints and many different factors we have seen our daily cost of living skyrocket.

We all knew that the purposely low rates could not and would not last forever, the question was not if but when would they rise and how fast. We now know the answer. The Bank of Canada has stated that they feel they will need to move rates to around 2.5% by 2023. This is from an ultra low starting point of .25%. We have already experienced .75% move with another .50% likely coming on June 1st. This should not be a surprise; however, it is human nature to pause decision making when there is a change or uncertainty, this is normal, and what some Buyers and Sellers may do right now.

This is a typical and expected response to a strong run up in prices, we are now heading into the normalization phase. The good news is that price divergence from normal growth levels is not as bad as the late 1980’s which will therefore result in less of a correction required. We are more in line with the change in 2017-2018, our last housing price pivot. Analyzing the correction in ‘17-‘18, there was approximately 25% give back of the growth which resulted in approximately -12% total correction in prices. This average would include areas that witnessed -20% (905 region) and some areas that continued to grow +5% (416 Condos). This time we will likely witness similar behaviour as Buyers assess their purchasing power, and Sellers come to terms with values in today’s interest rate environment.

We are still seeing significant buyer interest as there has been less speculation in today’s market than previous bubbles, just a fundamental need for housing. The population growth we are experiencing and the rotation back to work will continue to drive demand. This can be observed in the continued multiple offers we are seeing in well priced, high demand properties and the significant rental rate increase (+20% Y/Y), now eclipsing pre-pandemic rent levels. These signals show that confidence in home ownership, the basic need for living accommodation has not changed, the adjustment comes directly from the rate increase affecting budgets and translating to purchase price, likely bringing the pricing pressure to more normalized levels. Moving forward we will see this adjustment playout over the next 3-6 months, with the Bank of Canada interest rate decisions driving most of the result.

Real Estate has evolved in the last decade to become the largest part of our national economy. This will weigh heavily on the Bank of Canada decision making as clarified by Deputy Governor Toni Gravelle in his recent speech outlining the importance of housing in their decision making around rates.

It will be critical to take the long view of real estate to make the best decisions. Unfortunately, when we enter times of change, both Buyers and Sellers can accidentally make mistakes, and as a Service Oriented Realtor this is my time to assist in navigating. As a Buyer, it will be very important to stay engaged in the market so that when an opportunity presents itself, they will be able to recognize it and act quickly. If you are disengaged, its difficult to recognize an opportunity. As a Seller, you must remember that home values have done incredibly well over the past five years (review our pricing chart in Signature Portal) and they will continue to do well over the next five. If you need to sell, view todays market value relative to your purchase price, not the sale prices of February. Alternatively, if you don’t need to sell, continue to enjoy the property or investment for years to come, the results will be exceptional. The population growth we will continue to see, will continue to drive our housing demand for years to come.

Today’s market provides a chance for an adjustment to healthier long term pricing trajectory. As an investor I would be monitoring the market closely for opportunities as rents are rising. As an end user, I would be watching closely for opportunities where sellers must sell and might take a little less than market value due to timing pressures. As a Seller I would be patient, analyse my total return from the time I purchased and, although I might have missed February’s peak, the total return will likely be well ahead of the historic average in our market, as time in the market is more important than timing the market. 

👩🏽‍💻Chaunyce Thomas, #Realtor ®


🎤Community Ambassador 



🏡Royal LePage Signature Realty

🔗 Link in bio for Real Estate Resource or just call me and I’ll be your Resource 😏


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