Hi! Andrea Bertucci here with our Real Estate Market insights.

Housing market conditions have indeed continued to evolve throughout May. Sales were down, and active listings were up. GTA realtors reported just over 7,000 sales in May 2022, down 38% from May 2021. We’re also down 33.6% in sales from the February 2022 peak.

If we’re strictly looking at Detached homes in Toronto, the average price went from $2,067,000 down to $1,914,890 – A $152,000 drop in just three months!

We’ve hit a price resistance level not seen since 2017. This rapid change in market conditions is 100% driven by interest rate increases, which are back to pre-Covid interest levels. What we witnessed through Covid were recessionary level interest rate lows without the Recession. This was paired with the most significant transfer of generational wealth ever seen in Canadian history. Parents with adult children will sorely remember paying anywhere between 18% – 19% interest for their mortgages. Many saw this as an opportunity to give their kids a leg-up in the market. We’ll likely never see anything like this again in our lifetime.

It’s easy to look in the rear-view mirror and talk about the past. What is the future of the real estate housing market?

I just heard a talk by my favourite economist – Benjamin Tal. While he believes we’re in for a bumpy 18 months, while the BoC works to tamp down inflation, the fundamentals favour a strong housing market in the future. Ben reinforces this thinking with the following pillars; Immigration, Headship counts and worsening housing shortages. With Immigration, 70% of the 400,000 immigrants Trudeau promised entry to in 2021 are already on Canadian soil. Many are students, are working, educated, and speak the language. They have a high propensity for home ownership. Next, the way the Government of Canada counts the number of households leads to a gross underrepresentation of rental demand by about 500,000 people every year. Students who rent while away at school are not counted as another household in the Census and therefore don’t exist, but certainly take up real estate for at least ten months of the year. Lastly, big supply chain problems and skilled labour shortages mean construction delays and even housing project cancellations as profit margins erode for developers. All this to say that the housing shortage will be even tighter 18 months from now.

 

I’d love to hear what you think! Leave your comments below.