A house for sale on Major Street, Toronto, Oct. 26, 2022.Eduardo Lima/The Globe and Mail
Toronto’s real estate board predicts the region’s housing market will start to rebound in the latter half of this year, with home prices and sales increasing after months of declines.
The average home price for the year is expected to reach $1,140,000, the Toronto Regional Real Estate Board (TRREB) said in its annual forecast, released Friday. That is higher than January’s average price of $1,038,668 but still 4 per cent lower than last year’s average.
The board forecast 70,000 sales this year, 7 per cent fewer than last year.
TRREB cited an Ipsos poll it commissioned that looked at buyer intentions. That poll found that a larger share of would-be buyers were considering buying property this year than last year. As well, a slightly higher percentage of homeowners planned to put their homes up for sale.
Since the Bank of Canada started its aggressive campaign of hiking interest rates last spring, home sales have plunged by at least 40 per cent in the Toronto region, and the average price has dropped 22 per cent. Many prospective buyers had a harder time qualifying for a mortgage, while others waited for home prices to drop further. At the same time, many sellers waited for property prices to rebound and postponed their plans to list their homes.
TRREB predicted that activity would remain slow in the first half of the year owing to relatively high mortgage rates, which have put buying a home out of reach for many people. But the board expects the rates of fixed-mortgage products – where the interest remains the same for the term of the loan – to start falling this year.
Even though the central bank has increased the cost of borrowing, the Canadian labour market has remained healthy, adding 150,000 jobs in January. The country also plans to take in another record number of immigrants, and a big chunk of those newcomers will end up in the Toronto area. That should increase demand for housing, according to economists and the real estate industry.
“The second half of 2023 should be characterized by an increase in demand for ownership housing, supported by lower fixed mortgage rates, a relatively resilient labour market, and record immigration,” the board’s chief market analyst, Jason Mercer, said in a news release.
The Ipsos poll was conducted in the fall. At that time, the Bank of Canada was telling Canadians that it would continue to hike interest rates to slow inflation. The bank changed its tune in late January and said it would likely hold interest rates at current levels. (Though the latest employment figures will put pressure on the bank ahead of its next rate decision, on March 8.) That has given prospective buyers and sellers confidence that home prices may stop falling. Last month, they were flat, the first time values remained steady after months of declines.
According to the poll, 28 per cent of those surveyed said they were considering buying a property this year. That was up two percentage points from the previous year. The poll also found that 46 per cent of first-time homebuyers intended to make a purchase this year, up seven percentage points from the previous survey.