Nov 2022 GTA Market Update | 2023 Market Prediction

⚡November sales are down 49.4%, new listings are down 11.6%, the average price is down 7.2%, similar numbers for the last 3 months.

⚡BoC increased the interest rate by another 0.5% to 4.25% on Dec. 7.

⚡ Bill 23 is now passed – what you need to know!

⚡ My outlook on the 2023 GTA housing market.

GTA Market Stats Highlights

The stats look eerily identical to the last 5 months‘ market updates. The market seems to have stabilized even with 2 (and now a 3rd) interest rate hikes in that time. Since July, average price has plateaued and the number of sales looks to have stabilized.

Month over month, the average price has been hovering around $1.08M and the consumption rate is at 2.6 Months of Inventory (MOI) for the last 3 months.

Sellers aren’t listing their homes because of the price decrease which is restricting the supply with a lack of listings. Buyers’ budgets are restricted but there is still demand for housing, just smaller homes.

We’re heading towards a balanced market, but by the numbers (2.6 MOI), we are still in seller’s market territory. The nicest homes are still getting multiple offers and bidding wars. While other homes are sitting on the market for months.

Price change from the peak

	Peak in 2022	Nov 2022	Drop in $
Detached	$1,797,203 (Feb)	$1,390,162	$407,041
Semi-detached	$1,358,415 (Feb)	$1,039,200	$319,215
Townhouse	$1,254,460 (Feb)	$900,314	$354,146
Condo townhouse	$963,700 (Feb)	$799,029	$164,671
Condo apartment	$808,566 (March)	$708,636	$99,939

To find opportunities in the market, we need to look at the different market segments. The biggest price drop happened in the larger, freehold market (side note: since the price between semi-detached and townhouse are so close, the demand for semi is higher). It’s still a great time to upsize.

Last 2022 Interest Rate Hike

The Bank of Canada (BoC) raised its benchmark interest rate by another 50 basis points, to 4.25 per cent. BoC had increased 400bps in 2022, and it is the fastest and likely the largest cumulative tightening in 27 years.

Variable rate clients will see their monthly payment increase by about $30 for every $100,000 borrowed.

Prior to this recent rate hike, 50% of all fixed payment variable mortgages had already hit trigger rates (here is how you can check your trigger rate.), or about 13% of all outstanding mortgages. This doesn’t include floating variables either.

In March of this year, HELOC was 2.95% and the average variable rate was 1.45%.  And here are the current numbers:

• New BoC Prime: 4.25%
• New Retail Bank Prime: 6.45%
• New Average HELOC Rate: 6.95%
• New Low Variable Rate: 5.45%
• New Median Variable Rate: 5.95%

But there is an important change from the BoC. The bank says it “will be considering” whether or not the rate has to go higher. Compared to a month ago when they said “rates would have to go higher”. Inflation is a lagging indicator, so this is a good sign because the BoC doesn’t want to overshoot.

Bill 23 is now passed!

More Homes, Built Faster Act was passed by the Ontario legislature on November 28 and was done fairly quickly. This is the Ontario government’s plan to build 1.5M homes in the next 10 years. You can read our summary of the act here.

Most local municipalities are against this provincial act. One of the “selling features” of this act was to reduce development charges to encourage more development. Cities are set to lose out on 10s to 100s of Millions of dollars in revenue. This would result in property taxes going up to replace that missing revenue.

Mississauga would be expected to build 120k new homes in 10 years. In fact, Mississauga just sent a flyer outlining their position on it, see pictures below.

Moreover, more development means less parkland, sacrificing wetlands and developing greenbelt zones raising environmental concerns. We need more housing, but also responsible and sustainable housing options.

The challenge we face is that Canada is welcoming almost 500k newcomers every year. Where are they going to live? If we don’t build more homes, home prices are going to continue to rise to even more unaffordable levels. The only solution to the housing crisis is we need more homes.

The question is that if we scrap the development charges, the developers will pocket the profit. Do you think they will pass the savings on to new buyers? What’s your take on this?

Our team at Mister Sauga will keep you posted on new housing policies in Ontario, if you find it helpful, subscribe to our newsletter.

My Outlook On the 2023 GTA Housing Market

We are expecting another 0.25% interest rate hike on January 27. The BoC had made it clear that they will choose recession over inflation every day, so until inflation is under control, we can expect interest rate hikes to stay high.

Budget accordingly and if you have a variable mortgage rate, you should try and increase your payments or make a lump sum prepayment to keep your amortization period from getting out of hand.

As for the price, the housing market should continue to trend slightly lower in Q1 and possibly Q2. And it might not start to rebound until the end of 2023 or even until 2024.

With more interest rate increases, more variable rate homeowners will struggle to keep their homes. On top of that, as new construction projects come to completion in 2023, many investors are feeling the pinch. Some won’t be able to close and some will be forced to sell at a huge discount or a loss. This would be a good opportunity for buyers that are looking to get into the market.

If you’re considering selling because the payments are getting tight, I would recommend that you hold on as best as you can. Remember, staying power is power.

However, if you’re really feeling the pinch and you want to know what options you have, book a call with me here.

PSA, the market stats compare year-over-year, so the drop in average price will look a lot worse as we compare to the record high peak (Feb 2022) in the coming months leading up to February. It’s more relevant to look at the month-to-month numbers to see the trend.