Toronto Real Estate

Sales Summary

TORONTO REAL ESTATE MARKET REPORT SEPTEMBER 2023

Sales on TRREB have continued to weaken. For August there were 5,294 sales. This was 5.2% lower than August of last year and even with July. Usually, sales in August are higher than July.

So far prices have remained steady, but we believe that is about to change. A lack of new listings kept prices from falling. But in August, new listings were 16.2% higher than August of last year and the current inventory of active listings are 16.5% higher than a year ago. This represents almost 3 months of sales and is a strong indicator of a buyers’ market.

The Downtown and Humber Bay condo markets are even in worse shape. From August of 2022 to August of 2023, new listings are 40.7% higher and active listings are 46.2% higher.

Based on the increase in listings, expect overall prices to be 3% lower this fall. For the condo market prices will be down more. Expect price declines of 5-10%. This does not even consider the Assignment Market (people trying to sell their pre-con condos before registration).

Initially people believed that the Bank of Canada 5% rate would be over by the end of 2023. Our guess is that this 5% rate will last into the end of 2024. This poses problems for many mortgage borrowers. So, what is the solution?

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REDUCE THE STRESS TEST

The Government introduced a Stress Test when mortgage rates were under 3%. People with new mortgages had to qualify at their new mortgage rate plus 2% or 5.25% - whichever was higher. With today’s mortgage rates in the 6% range, that means the qualification is now 8+%. Owners cannot afford to move even when they want to downsize because they will not qualify for a new mortgage at the Stress Test rate. We need to encourage more buyers and sellers to enter the market. Right now, many people who want to buy are being forced into the renters’ market which makes this market even tighter. Let’s reduce the Stress Test to the five-year fixed mortgage rate. This gives buyers five years to pay down their mortgage and to see their income increase which should make it easier for them to qualify and renew.

SALES ACTIVITY IN THE STARTER CONDO MARKET

We looked at sales of small condos in the Humber Bay and Downtown Markets. The price range was from $300,000 to $500,000. The target market was first time buyers. (See Graph below) In both months, listings under $500,000 sold for above that number and these have impacted the average and median prices.

In comparison to the 36 sales in August ‘23, 181 people rented an apartment in the same market. For a studio they paid $2300 per month on average. If they purchased a $500,000 condo with 5% down; their monthly expenses for a mortgage, condo fees, and property taxes would be around $3300. About $700 of that amount would be the repayment of principal, so even accounting for that, buying is still more expensive by $300 a month. But if rates were to drop to 4% then buying would be at a break-even proposition.

RENTAL COMMENTARY

In August over 2500 condos were leased in the Downtown and Harbour Bay markets. This was down from July when 2900 were leased. The number of condos still available were just over 1800 units. The rental market is still tight, but it appears that we have reached the peak.

We are still experiencing multiple offers for many rentals. The initial list price to sale/lease price is still at 101%. While immigrants and student rentals are the primary causes for this tightness, another factor is that some people who sell their home cannot afford to buy another, because they do not qualify for a new mortgage under the Stress Test. They are then forced into the rental market as well.

Rental prices remained unchanged from last month. The table below represents average rents by bedroom type for August. Extras for parking ($300) and a second bathroom ($500) per month need to be considered.