Toronto Real Estate Updates! Where We’re At Now & Our Price Forecast For Year End 2022

Toronto Real Estate Updates! Where We're At Now & Our Price Forecast For Year End 2022


Are real estate sales drastically lower? Yes. Our real estate prices drastically lower? Well, it depends. 

You might have noticed that there has been a lot of bad news on the real estate front lately, but don’t be fooled. They’re talking about sales not prices. Yes, it’s true prices will come down because weaker sales should lead to them falling; however that’s just part of the picture. To get a better idea of where the market is at, you have to look at the relationship between sales and listings instead!

So in this video, let’s review the latest April numbers from TRREB to see what’s actually going across Toronto and the GTA. Based on the latest updates, let’s try to get a better idea of where real estate prices will end up by year end of this year in 2022.

Toronto Real Estate Price History: 2020 to 2022

We heard a lot of fingers pointing at low interest rates making real estate prices shoot up like crazy since COVID began. But how much has real estate actually shot up?

It turns out the difference is pretty drastic, even with Toronto and the GTA. Take a look at this. The market that has shot up the most are suburbs, with GTA detached homes shooting up 70% since COVID started. In the 416, we saw the most modest gains in condos only going up 14% since February 2020, and then semis going up 24%, and the more drastic change in the 416 was in detached homes, going up 40% since COVID started.

From this data, you can probably see that the market at the highest risk are the end user markets, mainly in the suburbs and detached homes in Toronto. And this overshoot becomes more obvious as interest rates begin to hike in the past 2 months. Since then, these overshot markets have started to retract some of their gains, with the GTA coming down 12% since the peak in February and 416 detached homes down 6%. Semis and condos on the other hand, have not changed much in price since February.

Sales To New Listings Ratio: Last Year vs. This Year

The sales to new listings ratio also shows us more signs of where the weakest markets are. This metric compares the relationship between sale and new listings during any given month. A lower number indicates more of a buyers market and a higher number indicates more of a sellers market.

Looking at this April’s data compared to the same time last year, you can see we are in a weaker market everywhere. But by far, the biggest difference between today and this point last year would be in the 905. In fact, it’s in very visible buying market territory right now stepping below 50% in all property types – detached homes, semi detached homes and condos.

In the 416, the freehold markets are also weaker than last year but the gap isn’t as pronounced compared to the suburbs, which really means that there are much stronger supports in the 416 area.

The submarket that was more of a shocker was the much weaker condo market in April. Last time in 2017, the condo market saw very strong supports, never entered buyer market territory, and was the least affected by rate hikes. But perhaps the big difference this time is that condos are cash flowing negative before rate hikes began so there’s no buffer this time around. So when you combine this with more aggressively front-loaded interest rate hikes this year and rents haven’t gotten a chance to catch up, investors are holding off until holding power gets better.

Factors Influencing Toronto Real Estate Prices

Now with signs that there’s a weaker market on all fronts, we do expect prices to come down from this point on. But here’s another thing to remember. Just because prices have gone up 70% in the suburbs since COVID, this does not mean prices need to come back down that amount.

The first thing to note is that a 70% increase is equivalent to a 40% drop in order to get back to square one.

The second thing is that real estate normally appreciates every year and over the past 10 years, real estate in Toronto have gone up around 7 to 8.5%, varying based on the submarket. It’s been 2 years since COVID began, so we expect prices to have gone up because of time.

The third thing is that the markets might have shifted permanently because of what’s happened during COVID. More people now prefer to live in bigger homes and are okay with living further out because they don’t need to go into the offices everyone. There’s also been a permanent uptick in real estate investor demand that’s not going to go away. So because of these factors, we’d factor in an extra one time COVID adjustment to our forecast.

Our Toronto Real Estate Growth Forecast

So based on these assumptions, we’ve come up with a forecast over here. As you can see, we expect 416 prices to be modestly up compared to year end 2021, which is in line with what TRREB has mentioned in their latest April report. On the other hand, we expect 905 prices do come from last year, and this might be different compared to TRREB’s view.

Keep in mind that this is referring to year over year increase, but prices have shot up a lot in January and February this year already by more than where we expect prices to be by year end. Things have retraced only slightly, and so we expect that prices still have room to fall in all of the Toronto and GTA markets at this point.

In 416 Toronto where we invest, we expect the investment properties to drop by less than 10% from today’s prices by year end. So, if you are able to get a 10% discount over today’s prices on a Toronto Investment property, you’re probably getting a pretty good deal.

Honestly, our forecast is pretty subjective, with the main variable being the one time COVID adjustment which can swing prices one way or another. We wish we had the crystal ball but of course there are so many things that can change from this point on, including changes to inflation, rents, rate hikes and other forms of government intervention which could swing the markets more one way or other other from this point on.

How We Can Help

At the end of the day, if you’re looking to invest in real estate, we recommend focusing on fundamentals.

Real estate provides stable rental income, and you can’t go wrong when you choose markets that have good long-term appreciation. Once you factor in leveraging borrowed money that you can get at a rate that’s lower than your investment returns, you can drastically improve your returns with the spread difference. And this makes a recipe for a great long-term investment.

So, if you’re new to real estate investing and want an expert to help you get on the right track, we’re ready for you! We can look at your requirements and preferences, and then match you up with the best investment property that fits your needs.

After we help you buy it, our team also provides renovations guidance, leasing and property management if you need it. Just connect with us if you want to learn more about our services!

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