Market Report | February 2023
The February 2023 Market Report
Interest rate hikes impact the Greater Toronto Area real estate market, leading to decreased sales and increased competition between buyers, while new and innovative solutions are needed to support record population growth.
The February 2023 TRREB Market Report
February sales in the Greater Toronto Area (GTA) were down substantially from the pre-rate hike levels of early 2022. However, the number of new listings also dropped substantially year-over-year. The result was that the average selling price and MLS® HPI continued to level off after trending lower through the spring and summer of last year.
“It has been almost a year since the Bank of Canada started raising interest rates. Home prices have dropped over the last year from the record peak in February 2022, mitigating the impact of higher borrowing costs. Many homebuyers have also decided to purchase a lower priced home to help offset higher borrowing costs. The share of home purchases below one million dollars is up substantially compared to this time last year,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.
GTA REALTORS® reported 4,783 sales through TRREB’s MLS® System in February 2023 – down 47 per cent compared to February 2022, the last full month before the onset of interest rate hikes. The number of new listings entered into the system was down by a similar annual rate of 40.9 per cent to 8,367.
“New listings continued to drop year-over-year in the GTA. Recently released Ipsos polling suggests buying intentions have picked up for 2023. This increased demand will run up against a constrained supply of listings and lead to increased competition between buyers. This will eventually lead to renewed price growth in many segments of the market, especially those catering to first-time buyers facing increased rental costs,” said TRREB Chief Market Analyst Jason Mercer.
February 2023 | Sales Comparison
The average selling price for February 2023 was $1,095,617 – down 17.9 per cent compared to February 2022. Some of this decline is attributable to the fact that the share of sales below $1,000,000 was 57 per cent in February 2023 versus only 38 per cent a year earlier. On a monthly basis, the average price followed the regular seasonal trend, increasing relative to January 2023. The MLS® Home Price Index (HPI) Composite Benchmark was down year-over-year by a similar annual rate of 17.7 per cent, but was also up on a monthly basis.
“As we move toward a June mayoral by-election in Toronto, housing supply will once again be front and centre in the policy debate. New and innovative solutions, including the City of Toronto’s initiative to allow duplexes, triplexes and fourplexes in all neighbourhoods citywide, need to come to fruition if we are to achieve an adequate and diverse housing supply that will support record population growth in the years to come,” said TRREB Chief Executive Officer John DiMichele.
Our Analysis
The report notes that sales of homes in the Greater Toronto Area (GTA) in February 2023 were down 47% compared to February 2022, which was the last full month before the Bank of Canada started raising interest rates. This significant decrease in sales is likely due to the impact of higher borrowing costs resulting from the interest rate hikes. As a result, many homebuyers are purchasing lower-priced homes to offset these higher borrowing costs.
Another key point mentioned in the report is the drop in new listings by 40.9% compared to the previous year. This decrease in supply, coupled with an increase in demand due to buying intentions picking up for 2023, will lead to increased competition between buyers. This competition will likely lead to renewed price growth in many segments of the market, especially those catering to first-time buyers facing increased rental costs.
The report also mentions that the average selling price for February 2023 was $1,095,617, down 17.9% compared to February 2022. This decline is attributable to the fact that the share of sales below $1,000,000 was 57% in February 2023 versus only 38% a year earlier. However, on a monthly basis, the average price followed the regular seasonal trend, increasing relative to January 2023.
In addition, the MLS Home Price Index (HPI) Composite Benchmark was down year-over-year by a similar annual rate of 17.7%, but it was up on a monthly basis. This suggests that the overall real estate market in the GTA is still experiencing some downward pressure on prices.
Overall, the report highlights the impact of interest rate hikes on the real estate market in the GTA, with lower sales volumes and decreased supply of new listings. However, the increased buying intentions for 2023 suggest that demand will eventually increase, leading to renewed price growth in the market. In order to support the record population growth in the years to come, the report suggests that new and innovative solutions, such as the City of Toronto's initiative to allow duplexes, triplexes, and fourplexes in all neighborhoods citywide, need to come to fruition to achieve an adequate and diverse housing supply.
