Market Report | May 2023
The Market Report | May 2023
Supply Shortage Hampers GTA Housing Market as Demand Soars: Sales Surge and Prices Reach New Heights
Supply Shortage Hampers GTA Housing Market as Demand Soars: Sales Surge and Prices Reach New Heights
The Greater Toronto Area (GTA) housing market continued to improve from a sales perspective in May 2023. Unfortunately, the supply of homes for sale did not keep up with the demand for ownership housing. Sales as a share of new listings were up dramatically compared to a year ago. This is a clear signal that competition between buyers increased substantially compared to last year, resulting in the average selling price reaching almost $1.2 million last month.
“Despite the fact that we have seen positive policy direction over the last couple of years, governments have been failing on the housing supply front for some time. Recent polling from Ipsos found that City of Toronto residents gave Council a failing grade on housing affordability and pointed to lack of supply as the major issue. This issue is not unique to Toronto. It persists throughout the Greater Golden Horseshoe. If we don't quickly see housing supply catch up to population growth, the economic development of our region will be hampered as people and businesses look elsewhere to live and invest,” said Toronto Regional Real Estate Board (TRREB) President Paul Baron.
Greater Toronto Area - Sales
GTA REALTORS® reported 9,012 sales through TRREB’s MLS® System in May 2023 – a 24.7 per cent increase compared to May 2022. Conversely, new listings were down by 18.7 per cent over the same period. On a month-over-month seasonally adjusted basis, sales were up by 5.2 per cent compared to April 2023.
“The demand for ownership housing has picked up markedly in recent months. Many homebuyers have recalibrated their housing needs in the face of higher borrowing costs and are moving back into the market. In addition, strong rent growth and record population growth on the back of immigration has also supported increased home sales. The supply of listings hasn't kept up with sales, so we have seen upward pressure on selling prices during the spring,” said TRREB Chief Market Analyst Jason Mercer.
The MLS® Home Price Index (HPI) composite benchmark was down by 6.9 per cent year-over-year in May 2023, but up by 3.2 per cent on a seasonally adjusted monthly basis compared to April 2023. The average selling price, at $1,196,101, represented a small 1.2 per cent decline relative to May 2022. On a seasonally adjusted monthly basis, the average selling price was up by 3.5 per cent compared to April 2023.
City of Toronto - Active Listings
City of Toronto - Monthly Sales
York Region - Active Listings
York Region - Monthly Sales
Our Thoughts on the current Market
In May 2023, the Greater Toronto Area (GTA) housing market demonstrated continued improvement in terms of sales, but unfortunately, the supply of homes for sale failed to meet the surging demand for ownership housing. Sales outpaced new listings, leading to intensified competition among buyers and driving the average selling price to nearly $1.2 million. Despite positive policy direction in recent years, the government's failure to address the housing supply issue has been evident, as reflected in the failing grade given by City of Toronto residents on housing affordability. This problem extends beyond Toronto, affecting the entire Greater Golden Horseshoe region. Without swift action to align housing supply with population growth, the economic development of the region may suffer as people and businesses seek alternatives elsewhere.
Canada Interest Rate
The GTA REALTORS® reported a substantial 24.7% increase in sales compared to May 2022, while new listings dropped by 18.7% during the same period. Although the MLS® Home Price Index (HPI) composite benchmark experienced a 6.9% year-over-year decline, it showed a 3.2% increase on a seasonally adjusted monthly basis. However, amidst this dynamic market, the unexpected interest rate hike in June has introduced uncertainty, potentially triggering a knock-on effect during the summer months as the Bank of Canada adjusts its rate policies.
Although there appears to be consensus that the Bank of Canada will reverse its rate hiking policy in the 4th quarter of 2023 or the 1st quarter of 2024, there is no certainty on this matter. It is apparent that inflation in certain segments of the market remains sticky and the Bank of Canada will do what it can to bring it down to its mandate of 2.0%. The second half of 2023 will most definitely be very interesting.
