June was the first month since January when both sales and average sale prices declined, as compared to the month before. June saw 7,481 reported residential resales as compared to almost 9,000 sales in May. The average sales price dropped moderately from $1,195,929 for the Greater Toronto Area as compared to the price of $1,182,120 in May.
Notwithstanding these declines, the market remains exceptionally strong, with demand continuing to outstrip supply. The decline can be attributed to a number of factors. These include a return to the historical seasonal declines in June (distorted during the pandemic), and the lack of supply. In June, only 15,865 new properties came to market. This was three percent fewer than the 16,353 that came to market last year. At the end of the month, there were only 14,107 homes available to buyers (more than 12 percent fewer than last year). Given the incredible growth in the Greater Toronto’s population, at least 20,000 properties should be available to buyers to even begin to reflect a balanced marketplace, if not many more.
Affordability is the main issue impacting the resale market. In June, after a five-month pause, the Bank of Canada raised its overnight rate to 4.75 percent, the highest it has been since 2001. Unfortunately, the Bank has given every indication that it will once again increase its benchmark rate in July. The consensus amongst Canadian economists is that the rate will go to five percent. This will have a further dampening effect on the resale market, as most buyers are already struggling with affordability. As it is, buyers in the Greater Toronto Area need a 20 percent down payment ($236,424) and a household income of more than $250,000 to buy the average-priced property in the Greater Toronto Area.
Even with these staggering high costs of housing, the Toronto and region resale market remains surprisingly resilient. In June, all properties reported sold were on the market for only 14 days. Last year properties were on the market for 15 days. Not only did they sell quickly, but they all sold for an eye-popping 104 percent of their asking price. These numbers include all condominium apartment sales. Sales of detached and semi-detached properties in the City of Toronto sold even faster, in 11 and 10 days, respectively. All semi-detached properties in the City of
Toronto’s eastern districts sold in a mere 7 days for an astounding 118 percent of their asking price. These are incredible numbers given the high cost of detached and semi-detached properties in the City of Toronto and in the 905 region.
There are still a few communities in the 905 where the average sale price is under $1 Million but they are becoming a rarity and generally located in the outer sectors of the region.
The strength in the resale market is due to a combination of population growth and the lack of supply. In June alone, Canada’s population increased by 84,000 due to immigration. Almost half of those immigrants will relocate to southern Ontario. Last year 227,235 immigrants arrived in Ontario. British Columbia, the next highest destination for new immigrants, saw only 83,200 relocating to the Province (Source: © Statista 2023).
If the Bank of Canada increases the benchmark rate as is expected in July, sales will continue to decline throughout the region, although, given the demand, average sale prices will only moderately decline. For the time being, there are no forced sales due to financing problems, and hopefully, the benchmark rate will begin to decline before that becomes a problem that the resale market will have to face. It is anticipated that the benchmark rate will begin to decline in 2024, although any declines will be moderate. The day of two-percent mortgage interest rates that propelled the resale market through the pandemic will become a distant, and no doubt longed for, memory.