August 2022 Toronto Market Watch

High Borrowing Cost Impacting GTA Real Estate Market, Bank of Canada Increases Policy Interest Rates By 0.75%, Rent Soar By Double Digits Annual Increase

It is noted that the August home sales is about 34% less compared to August 2021 but the average selling price still has a slight increase of 0.9% compared last year. The sales-to-new-listings ratio in August 2022 is 53% which is comparatively higher than the consecutive previous 4 months and is similar to the ratio of 55% in March 2022. 50%+ represents a more balanced market.

On 7 September 2022, the Bank of Canada announced to raise further the interest rate by 0.75% to help flight inflation. The decline of sales transactions has reflected the effect of higher borrowing cost to temporarily preclude the home buying of some households and investors.

“275,000 new permanent residents have arrived in Canada till July 2022” said Sean Fraser, Minister for Immigration, Canada In addition, 349,000 new work permits were issued during the same period of time. Further 360,000 study permit applications have been finalized so far in 2022.

In the detached house segment, the sold price over 2M is the third highest number of sales in August similar to the range of $900,000 – $999,999. It may indicate that some serious home buyers prefer paying the temporary high borrowing cost to get the reasonable purchase deals rather than high selling prices with strong competitions later.

In the condo apartment segment, the lower sold price ranges between $500,000 to $699,999 are the highest number of sales. These buyers who are most likely the first time buyers or investors can reduce the impact on high borrowing costs and can mitigate the risk in the future.

“Now, buyers are experiencing more negotiating power and motivated sellers are adapting to the more recent market conditions” said CEO and Broker of Record at Zoocasa. The property prices still depend on the local dynamic and neighbourhood.

Toronto condominium apartment rental market keeps to heat up during the summer vacation, resulting in extremely strong upward pressure on average rents. A shortage of rental supply becomes very undesirable situation caused by the rapid population growth of new immigrants and international students back in Toronto.

As per TRREB Q2 2022 Condo Apartment rental market report, the vacancy rate is less than 1% in most major municipal cities and the average rent for 1 bedroom reached $2,269 as at June 2022.

According to Rentals.ca August report, the average rent in Toronto is increased to $2,694, up by 24.2% :

– 1 Bedroom $2,329; 2 Bedroom $3,266

During this critical situation, the investors in particular of holding the brand new units are benefited from this upward rental to cover the extra interest payments

Housing starts decline almost 3% in August, amid concerns about supply

A recent report from the CMHC concluded that the country would need to build 3.5 million new homes by 2030 to reduce its shortfall and improve affordability. Canada is averaging only 200,000 to 300,000 new units per year. In addition, the Federal Government continues to welcome 1.2M+ new immigrants between 2021 to 2023. Housing crisis is a long term major problem!