The price of buying a home in Ontario dropped from its lofty heights during the past year, and the question for 2023 is whether the downward trend will continue.
The Canadian Real Estate Association (CREA) benchmark price of a home in Ontario — a measure that combines sale prices of condominiums, attached and detached houses across all markets in the province — peaked at $1.08 million in March of 2022.
That was a staggering 64 per cent leap in just two years, from the start of the COVID-19 pandemic.
CREA’s benchmark figure for Ontario has since fallen by nearly 20 per cent, but even that sharp decline only takes prices back to the level they were at in September of 2021.
How much lower will home prices in this province go? With the number of homes bought and sold monthly now lower than it’s been per capita since the mid-1990s, when will the real estate market start to pick up again?
CBC News surveyed real estate experts and analyzed published forecasts to give you this preview of the Ontario housing market for 2023.
This home in Toronto’s east end was first listed for $1.849 million, relisted for $100,000 less and ultimately sold in October 2022 for $1.65 million, according to data from the real estate firm Realosophy. (Showwei Chu/CBC)
Overall, real estate analysts generally expect home prices to continue to fall, but not a lot further than they already have.
Rishi Sondhi, of TD Economics, forecasts prices in Ontario will decline through early 2023 but bottom out in the second half of the year.
“We are expecting further downside [to prices] but less relative to what we’ve seen so far,” said Sondhi in an interview.
“We think that the bulk of the correction … is behind us.”
That’s partly because there are some signals that the bulk of the Bank of Canada’s interest rate hikes are behind it. The central bank raised its standard-setting benchmark rate seven times in 2022 in an attempt to tackle inflation
Condo projects could be cancelled
Randall Bartlett, senior director of Canadian economics with Desjardins, says it’s an open question when Ontario home prices will stop dropping because various factors on the supply and demand side are pulling in opposite directions.
Those higher interest rates have been the biggest factor dampening demand. However, Bartlett points out employment levels remain strong and immigration numbers are expected to rise, fuelling demand for housing.
The Canada Mortgage and Housing Corp. is predicting headwinds for new condo construction in the Greater Toronto Area. ‘Higher construction costs and interest rates could lead to project cancellations or delays in project launches and dampen homebuying activity,” said the CMHC in a recent housing supply report. (Patrick Morrell/CBC)
On the supply side, many property owners are reluctant to list their properties given how the prices dropped, yet many investors could be forced to sell due to the higher carrying costs of those high interest rates.
There are also signs that the recently rapid pace of new home construction is slowing. The Canada Mortgage and Housing Corp. (CMHC) recently warned that in the Greater Toronto Area, the combination of a sharp drop in condo pre-construction sales, higher building costs and higher interest rates “could lead to project cancellations or delays in project launches.”
“We’re in a very different environment,” said Bartlett. “Demand has cooled off, prices have come down, interest rates are higher.”
He says this could have an impact on the supply of new housing coming on the market in the latter half of 2023.
Mark Ostland, a real estate expert with Meridian, Ontario’s largest credit union, says if the Bank of Canada is done raising rates, that will give more confidence to potential buyers.
Volume of listings expected to remain low
“We are in what I call ‘even-steven times’ at the moment,” said Ostland in an interview.
“On the one hand, we’ve got more affordable home prices than we’ve seen in the last couple of years. But on the other hand, we have the continued rising interest rates that are affecting buyers’ ability to qualify for the mortgage amount they need.”
Real estate analysts generally believe the volume of listings and sales in Ontario will remain low for some time to come.
This graph from the Canadian Real Estate Association shows how its benchmark home price in Ontario has changed over the years, with a steep drop since peaking in March 2022. The benchmark price is calculated from the composite value of sales through the MLS real estate system. (CREA)
“People really don’t want to list their homes when sales and prices are falling, for obvious reasons, and so far, that factor is sort of winning out and keeping supply relatively subdued,” said Sondhi.
Every month since June, home sales numbers in the Greater Toronto Area have been at their absolute lowest in more than a decade — with the exception of the lockdown-affected period in the spring of 2020.
“Sharply higher interest rates and the considerable loss of affordability continue to challenge buyers. And we think they will keep the market quiet for some time to come,” said RBC economist Robert Hogue in his housing market report in December.
On the price side, Hogue noted that Toronto-area prices have fallen 18 per cent from their peak and said “any further depreciation is likely to be more incremental.”
GTA vs. rest of Ontario
ReMax, one of Canada’s largest real estate firms, forecasts prices in the Greater Toronto Area will decline to their 2021 levels, a roughly 11 per cent drop from the average this year.
There’s debate about what will happen to housing markets elsewhere in Ontario that saw astonishingly high run-ups in prices over the past two years.
In the fall of 2021, this house in Toronto sold for $1.9 million, more than $500,000 over the asking price. (CBC)
“Our view is that markets outside of the GTA actually have further to fall than the GTA has,” said Bartlett.
Ontario’s smaller cities have a greater proportion of houses to condos than in the Toronto area and that’s one reason why they remain more vulnerable to further drops in 2023: Prices for condos have been somewhat less volatile than for houses.
ReMax’s 2023 real estate outlook predicts average price declines of up to 15 per cent in London, Kitchener-Waterloo, Barrie, and the Georgian Bay area, while forecasting modest price increases of two to eight per cent in the rest of the province, including Ottawa, Hamilton, Windsor and Sudbury.
Nationally, the CMHC is forecasting the average sale price across Canada to continue to decline until the second quarter of 2023.
The coming year will provide an early test of Premier Doug Ford’s promise to pave the way for 1.5 million new homes to be built in Ontario in a decade.
The Ford government has used the housing supply crunch as its justification for recent moves to limit what municipalities can charge for development fees, weaken the powers of conservation authorities and open up pockets of the Greenbelt to housing.
‘The Bidding War’ is a play skewering Toronto’s real estate market via a story about a one-day bidding war over the city’s last affordable home. The cast and crew say it exposes how the housing crisis brings out “the worst in people.” (Nov. 12, 2024)
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
