The Canadian housing market over the winter has been dominated by two narratives – record low inventory and consistently increasing prices. Active listings were at the lowest levels in more than two decades for a time during this winter, leading to an incredibly competitive marketplace. The average price of a home in Toronto has risen by 27.7% year over year in February even as supply increased by 77% month over month.
The market has also been assisted by sustained historically low interest rates as well. This cheap cost of borrowing has been a factor in why price growth has continued throughout the winter.
However, as the supply trend in February suggests, we look to be headed in the direction of a slightly more balanced market. The data for last month leads to a sales to new listings ratio (SNLR) of 64%, down 9% month over month, pointing towards the market looking a little more favourable for buyers in the coming spring. More balance in the market is likely to slow price escalations but not necessarily reverse them.
Prices set to rise by over 4% by the summer
According to 10 year historical data from TRREB, Zoocasa projects the average price of a home in the GTA to hit $1,390,124 in June 2022, an increase of 4.16%, and a dollar increase of $26,194.20. Sales volume is projected to reach 13,638 transactions, up 22.8% from June of last year.
To determine these projections, Zoocasa analyzed sales and prices for the months between February and June for the period between 2011 and 2021. The percentage difference was then calculated for average prices and sales volumes each year. Those averages were then applied to price and sales data to project June 2022 average price and sales numbers. A high and low range was also calculated by averaging the percentage difference in the top five and bottom five years and applying that to the June 2022 data.
On the lower end of the range, prices are projected to increase 0.21% to $1,337,294 with sales down to 11,538, a dip of 15.3%. On the high end, prices are projected to increase 8.12% to $1,442,955, with sales improving by 13.3% to 15,739. It is worth noting, these trends and estimates tend to be heavily impacted by the market correction in April 2017, where prices dropped around 20% over a few months as a result of the implementation of the Ontario Fair Housing Plan.
What does this mean for home buyers and sellers?
As our predictions suggest, pricing for houses, while still increasing, would slow from its current breakneck pace moving into the Spring market period. February’s average price increase for a house in the GTA was 7% month over month, from $1,242,793 to $1,334,544. With improved inventory, the trend towards a more balanced market should provide some encouragement for buyers who have been feeling fatigued after a tough winter.
Zoocasa realtor, Claudio Castro, highlights: “A lot of what happened in the market over the winter can be attributed to buyers knowing that our era of historically-low interest rates was coming to a close. And, as the Bank of Canada recently announced, overnight lending rates have been increased by 25 basis points. So I think what we’ll see in the next few months is people acting according to that rate hike. A lot of that demand in the last few months has been driven by locking in interest rates.
While we won’t see a huge jump in new listings overnight, and we’re very much still in a seller’s market, we are starting to see some inventory drip through, which should provide relieffor buyers who have found themselves a little tired due to the record low stock and high prices throughout the winter. We’re still a long way away from a buyer’s market, but they’re beginning to see some more leverage as we head into more balanced conditions.”
TRREB’s initial prediction of 12% price growth throughout the year in the GTA has already been surpassed in the first two months of the year by the actual figure of 15%. With rising rates, price uncertainty could be a big feature going into the Spring market, but the numbers do suggest that they will continue to rise in the coming months, just not at the same pace.. In our 2022 housing market predictions, we noted a key factor on the market would be rising home prices and the influence increased rates could have.
If you’re considering buying a home this Spring, your first step should be to book a free buyer’s consultation. One of our agents will walk you through the home buying process, as well as providing ideas to find the right property for you given what you’re looking for and your budget.