Varun Kohli June 27, 2023 No Comments

Toronto’s real estate market is showing remarkable resilience and bouncing back with vigor, according to recent data released by the Canadian Real Estate Association (CREA). The statistics reveal a significant increase in national home sales in May 2023, signaling positive growth in the Toronto market and other major Canadian cities.

The Greater Toronto Area (GTA), along with Montreal, Greater Vancouver, Calgary, Edmonton, and Ottawa, experienced an uptick in sales activity. Approximately 70% of local markets across the country reported an increase in home sales during this period. Between April and May 2023, there was a notable 5.1% month-over-month surge in home sales, building upon the already robust double-digit surge observed in April.

While the year-over-year sales increase of 1.4% may appear modest, it marks a significant milestone for the Canadian housing market. This is the first national year-over-year sales growth in nearly two years, since June 2021.

According to Shaun Cathcart, CREA’s senior economist, the rebound in housing activity this year was expected due to strong underlying demand. The timing of the rebound was the only uncertainty, which was answered in the spring of 2023. He further explained that the puzzle piece that was less obvious was the reluctance of existing homeowners to make a move, as they were reluctant to give up their ultra-low fixed rates secured during the COVID-19 pandemic. This reluctance has led to a potential tightening of housing supply, which may impact prices.

While the number of newly listed homes increased by 6.8% in May compared to the previous month, it’s important to note that new supply remains historically low. The sales-to-new listings ratio, which measures the number of homes sold against the number of new listings, was 67.9% in May, slightly lower than April but still above the long-term average.

Inventory levels also saw a decrease, with 3.1 months of inventory available nationally at the end of May 2023, down from 3.3 months in April. This tightening of supply is significant, considering inventory has declined by over a month since its peak in January. The long-term average for inventory is around five months.

The positive trend is further supported by a notable 2.1% month-over-month increase in the Aggregate Composite MLS® Home Price Index (HPI) in May 2023. This increase in prices was observed across various local markets, indicating a broad-based recovery. Although the Aggregate Composite MLS® HPI still remains 8.6% below year-ago levels, the decline has significantly lessened compared to earlier months.

The commercial real estate sector in Toronto is also displaying resilience, particularly in industrial and retail spaces. Demand for warehouses and distribution centers has surged amid low real estate inventory. The retail sector has shown remarkable strength as people gravitate back to brick-and-mortar stores, especially along major arterial roads. Industrial real estate, with vacancy rates under one percent, is currently the strongest sector in Toronto.

Parents helping their kids join the Toronto real estate club:

Amidst soaring housing costs and inflation, owning a home in Toronto has become a distant dream for many young individuals. However, despite the barriers, demand in the real estate market is once again on the rise, and homes are selling. So how are people managing to buy them? It turns out that there is one source of capital that continues to flow abundantly—the bank of mom and dad.

A study conducted by the Ontario Real Estate Association in 2022 revealed that four in 10 Ontarians have provided financial assistance to their children when purchasing a home. Of those parents, 72 percent gifted money to help with a down payment, 61 percent loaned money for the same purpose, and 38 percent assisted with mortgage payments. On average, parents who offered financial support for a down payment gave approximately $73,605.50, while those who provided loans contributed around $40,878.90. With home prices in Ontario having risen by 450 percent from 1996 to 2021, it’s not surprising that many parents in the province have significant home equity they can tap into, and some are choosing to pass down that intergenerational wealth.

The bank of mom and dad has become a crucial source of capital for many young individuals trying to navigate Toronto’s challenging real estate market. Parents who have built substantial home equity are leveraging their assets to provide their children with opportunities for homeownership and financial stability. By passing down intergenerational wealth, they are enabling their children to create their own paths to success and secure futures. While this is a sign of how expensive real estate has become, it is also a strong show of inter-generational confidence in the long-term state of GTA real estate.

The BOC will go all out to crush inflation

Former Bank of Canada governor David Dodge warns that the central bank has a limited timeframe of a year to 18 months to control inflation. Failure to do so could result in a return to the turbulent era of the mid-1970s and 1980s, marked by unpredictable pricing and social upheaval. Dodge suggests that modest interest rate increases of around six percent can help align demand and supply, restoring stability and public expectations of price predictability. Acting swiftly is crucial, as a lack of progress within the specified timeframe would result in a significant loss of social capital. The report emphasizes the urgency of addressing inflation to avoid economic uncertainty and diminished trust in institutions. Dodge’s comments underscore the need to implement effective measures and restore stability within the coming months to prevent a return to past economic challenges.

Overall, Toronto’s real estate market is demonstrating a promising and continued rebound in 2023. With the demand for industrial and retail spaces booming, commercial real estate in the city remains a hot commodity for investors. The recovery in the housing market, along with the resilience of the commercial sectors, contributes to a positive outlook for Toronto’s real estate landscape.

Leave a Reply

Your email address will not be published. Required fields are marked *