As expected, June produced a substantial negative variance compared to the numbers that the Toronto and Region residential resale market produced in June of 2021. Over the last three months, rising mortgage interest rates have caused sales to drop somewhat precipitously, and although sales prices are off from their high of February this year, they remain higher than average sale prices achieved last June.
In June, 6,474 properties were reported sold, a 41 percent decline from the 11,053 properties reported sold last June. However, the average sale price came in at $1,146,254, more than 5 percent higher than the average sale price of $1,088,991 achieved last June. A review of what’s been happening since February, both to sales and average sale price, gives a more accurate description of where the Toronto and Region residential sales market is going.
In February, 9,044 properties were reported sold, achieving an eye-popping sale price of $1,334,142. One could safely say that February was the height of the pandemic, liquidity-induced resale market. March produced more sales (10,902) but could not sustain the unprecedented average price. March’s average sale price dropped to $1,299,468. Higher mortgage interest rates kicked-in in April; since then, both sales and average prices have declined dramatically.
As the above noted chart indicates, since February, the average sale price has declined by $185,000, or 14 percent; since March, sales have declined by more than 40 percent. These declines can be charted directly to the increase in mortgage interest rates. Declines in sales and average sale price will continue as the Bank of Canada raises its benchmark rate to fight inflation. However, those declines will be more moderate unless the Bank of Canada raises rates so high that it tips the Canadian economy into recession.
Interestingly, June’s numbers continue to demonstrate that the demand in the Toronto and Region resale market has not dissipated with rising mortgage interest rates. In June, all properties (on average) sold in just 15 days, only 2 days more than the 13 days it took last year. (This number may not be entirely accurate since it does not reflect properties that were listed and cancelled, then relisted at a lower price). In addition, all properties reported across the region sold for 100 percent of their asking (also not an entirely accurate number) and in the City of Toronto at 101 percent of their asking price.
Regardless of the precise accuracy of these numbers, they clearly demonstrate that many buyers in the marketplace are searching to buy homes. As more immigrants settle in the greater Toronto area, the demand will continue to grow and create the same market pressures that manifested before and during the pandemic. However, they won’t be fully apparent until the Bank of Canada has inflation under some control and mortgage interest rates stop rising.
It should be noted that during the pandemic (not that it is no longer with us), properties in Toronto’s 905 region sold faster and at higher prices than homes in the City of Toronto. That pattern has been reserved. As health and travel restrictions have eased, buyers are no longer looking for the space and safety that ground-level properties in the 905 offered. As a result, every housing type in the City of Toronto – detached, semi-detached, townhouse, and condominium apartments – achieved average sale prices substantially higher than corresponding counterparts in the 905 regions. Secondary markets – within 200 kilometers from Toronto – are similarly experiencing downturns in average sale prices and sales.