What makes 2022 and 2023 numbers concerning is the fact that population in the Greater Toronto Area has grown by almost 15 percent since 2011. In 2011, the area’s population was 5,593,000. As a result of high levels of immigration, as we enter 2024, the population of the area is now approaching 6,400,000. With growth of almost 1 million people since 2011, and without the impact of the pandemic, first government liquidity, and then the Bank of Canada’s tightening monetary policy, the greater Toronto resale market should be producing 100,000 to 105,000 reported sales annually.

So, what happened in 2022, and more significantly in 2023? Simply stated, affordability was beyond the grasp of most buyers. The Bank of Canada began its benchmark rate hikes in 2022, and then continued in draconic fashion to increase its policy rate in 2023. In July of 2022, the policy rate was 2.50 percent. By July of 2023 it had doubled to 5.00 percent, where it currently remains.

In October, 4,646 residential properties were reported sold, almost 6 percent fewer than the 4,930 reported sales last year. Year-to-date, 56,367 homes have changed hands. Based on the current pace of sales, the year will finish with about 70,000 reported sales. Aside from 2018, (and of course, 2022, when the Bank of Canada began its draconian rate increases when only 78,017 homes changed hands), we have to go back 2 decades to see such low sales numbers. The low sales volumes in 2018 were due to the implementation of the then Liberal government’s 2017 Ontario Fair Housing Plan.

The Plan introduced a non-resident speculation tax (NRST), and it expanded rent control to all private rental units, including those built after 1991. A government statement at the time boasted that the Plan was designed to “make housing more affordable... to create fairness and opportunity during this period of rapid economic change”. Since the implementation of the Plan, the NRST has increased from 15 percent to 25 percent of the purchase price of a property. In 2017, the average sale price for properties sold in the greater Toronto area was $822,510. This October, the average sale price for all properties sold came in at $1,125,928, an increase of 37 percent over the last six years. Affordability has clearly not been achieved. A clear indication of the ineffectiveness of government intervention in the residential resale marketplace, particularly when that intervention is politically and not realistically motivated.

Condominium apartments are the only housing type that is showing rising sales volumes. In August, condominium apartment sales (1,086) increased by 6.5 percent compared to August 2022. In the 905 region condominium sales (523) increased by 10.17 percent. These are properties that buyers can afford.

Given the fact that we are unlikely to see a decline in the Bank of Canada’s benchmark rate until the middle of 2024, in fact, we may experience an increase before that time, and given the fact that household incomes are not increasing dramatically, we may be in the early stages of a market restructuring. (In 2021 the median economic family income in Toronto was $106,000. City of Toronto Census Study). A market restructuring took place in the early 1990s and there are indications that we may be about to re-experience that era.

From 1985 to the spring of 1989, average sales prices in the Toronto region increased by an eye-popping 113 percent. During this period, there were factors at play that were not dissimilar to today, particularly tremendous demand. Even though mortgage interest rates were much higher than they are today, there was an unmitigated belief that wealth could only be achieved and preserved by buying and owning real estate. As a result, there was a market frenzy, not unlike the height of the pandemic. It was this frenzy that caused prices to escalate by 113 percent in a mere 4 years.

The decline in reported sales since May is 42 percent, with a decline of 30 percent when July sales are compared to those of June of this year. These results unequivocally indicate how powerful the impact of Federal monetary policy is on the real estate market. Interestingly, the decline in average sale prices, which has also taken place, is not nearly as dramatic as the decline in sales. Compared to a 42 percent decline in sales, the 3 percent decline in average sale prices is negligible.

Ironically, the decline in reported sales and average sale prices is not an indication of a weak market. Rather, it reflects affordability, or stated more accurately, the lack of affordability. Each rate hike that the Bank of Canada implements makes it that much harder for buyers and in many instances removes them from the market. Those buyers that have the financial ability are still engaged and continue to drive the market in ways that appear to be incongruous with sales and average sale price numbers.

In July, all 5,250 properties reported sold were contracted after only 17 days on market (on average), while all properties sold for 102 percent of their asking price. In the City of Toronto, properties sold for 103 percent of their asking price. Detached properties in the City of Toronto, which had an average sale price of $1,641,000, sold at 102 percent of their asking price, whereas semi- detached properties ($1,257,000) sold for 108 percent of their asking price. In Toronto’s eastern districts, semi- detached properties sold for an eye-popping 113 percent of their asking price and in only 11 days. These numbers reflect a market that is extremely robust. Unfortunately, because of a lack of affordability generated by the Bank of Canada, some buyers simply can’t participate in it.