Just over a year ago, Canada’s benchmark interest rate began to rapidly rise — increasing a total of eight times, from 0.25% to the current 4.50%, over the 12 months that followed.
The result? A quelling of the years-long record-hot real estate market Toronto had been experiencing throughout the COVID-19 pandemic.
Since then, we’ve seen home affordability drop (thanks to higher mortgage rates), more days on the market (as sellers hope for pandemic-era offers that many would-be buyers can no longer afford), home values drop across the country, fewer homes for sale and a calming of once-commonplace bidding wars.
But now that it’s been a few months since the last Bank of Canada rate increase and the Spring real estate market — which tends to be the busiest time of year — is starting up, market activity is expected to increase. In fact, we’re already seeing this start.
Here’s what’s been happening in the Central Toronto area over the past month and what that signals for the Spring market:
Sales volume has increased month-over-month, despite being down significantly from last year.
The difference between last month’s home sales vs. February 2022 is stark.
According to the latest data from the Toronto Regional Real Estate Board (TRREB), the volume of semi-detached and detached home sales were down 42% year-over-year in Central Toronto, while condominium sales were down by an even more pronounced 50%.
Nevertheless, the year-over-year change for semi-detached homes and condos was actually less last month than it was in January (-42% vs -49% for semi-detached and -50% vs -61% for condos). Plus, the volume of home sales in Central Toronto across all home types was up 67% month-over-month, a trend we expect to continue into March and April.
“From the outside looking in, the numbers being reported for February look less-than-promising, but they’re actually improving,” said Cailey Heaps, President & CEO of The Heaps Estrin Team. “Sales will continue to rise over the next couple of months, but inventory will become more of an issue as this occurs, resulting in increased competition among buyers.”
Toronto home prices have risen for the first time since early 2022.
One of the results of higher interest rates has been a decline in the average price of Toronto homes over the past year.
Because most buyers can’t afford to spend as much as they could when rates were sitting at a record-low 0.25%, the share of sales below $1,000,000 has significantly increased — from 38% in February 2022 to 57% today. And while the numbers in the Central Toronto market aren’t as severe, we’ve still seen a price drop between 8-18% (depending on home type) in the past 12 months. Despite this, for the first time since early last year, home prices increased last month.
Across all TRREB markets, the average price went up to $1,095,617 — an increase of more than 5%. And in Central Toronto, the numbers were even better. The average home price here now sits at $1,591,351 — an increase of over 15%.
Semi-detached homes saw the steepest price increase in February, up 20.5% to $1,568,845. Detached houses followed closely, experiencing a 17% increase in selling price. And as the competition among buyers heats up through March and April, renewed month-over-month price increases are expected.
Cailey Heaps expands on this, saying, “Across the Heaps Estrin team we’ve seen many multiple offer home sales within the last few weeks, from three offers all the way up to 13 on our recent listings. It’s safe to say buyers are back in the market.”