Despite rates going up, inflation remaining high, and prices surging, the real estate market in Toronto and much of the GTA is still rock solid. While sales and listings are starting to fall, prices are still going up in the city. A recent Desjardins report warning of price declines of up to 15% in the outer rim of the GTA and in small town Ontario specifically cited that pieces in Toronto and the GTA would plateau or decline by extremely marginal amounts by the end of 2023. The resilience of the regional real estate market is tried and tested. Despite these conditions, there are a huge number of prospective buyers who are waiting for prices to decline so they can buy a home and enter the market. Nation-wide home values have increased by 50% over the past two years, numbers in hot markets like Toronto and Vancouver have been even more impressive. Even a hypothetical small 10% decline in prices in Toronto would be a fraction of what the gains have been recently.
Real estate projections for 2022 all went out of the window once inflation kept rising and rates were raised far too late in response. What was once a sellers market for ages has now started to shift toward buyers. Some are arguing that this is a negative and a harbinger of declining prices and less dynamism, while others are saying that this is a healthy rebalancing after almost a generation of sellers making consistent and ever higher profits. Tembo has repeatedly written about the vast number of prospective buyers who continue to build up their savings, lower their debt, and improve their employment prospects to qualify for healthy mortgages and to prepare for their final buy-in into the real estate market. The market is beginning to healthily shift toward those who can pay higher monthly payments with higher mortgage rates and who have solid jobs. These are people who were aspiring upper middle class members but who didn’t have enough down payments for solid properties in the downtown core given the immediate post-COVID boom in prices.
More and more of those waiting buyers are now apparently planning to wait even more, until September for example, anticipating further cooling or even some marginal price declines for some assets. Economists and realtors across the spectrum are commenting that the impact of rate hikes has been significant, but has sunk in faster than they had anticipated. A Senior Economist from Scotiabank made the following comments on rate hikes in an interview with the Globe and Mail: “The rate hikes were meant to remove some of the exuberance from the market, which they are doing – admittedly, however, they are doing so at a much faster pace than previously anticipated.” At the end of the day, there are little to no projections of big price declines in Toronto, and there is still a tremendous amount of demand waiting for the right moment.