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Higher Borrowing Costs See Buyers Remain on Hold Lack of affordability and uncertainty remained issues for many would-be home buyers in the Greater Toronto Area (GTA) in October 2023. As a result, sales activity edged lower compared to last year. However, selling prices remained higher than last year’s levels. “Record population growth and a relatively resilient GTA economy have kept the overall demand for housing strong. However, more of that demand has been pointed at the rental market, as high borrowing costs and uncertainty on the direction of interest rates has seen many would-be home buyers remain on the sidelines in the short term. When mortgage rates start trending lower, home sales will pick up quickly,” said TRREB President Paul Baron. | |
4,646 GTA home sales through TREB’s MLS System in October 2023 | | |
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Down 5.8% compared to October 2022. |
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The Greater Toronto Area (GTA) housing market stands strong even in the face of challenging economic conditions. Over the past few months, there has been an uptick in home values, with a cumulative increase of $43,432, and a second consecutive monthly rise of $6,500. This puts the average GTA home price at $1,125,928, reflecting a year-over-year increase of $36,500. Among the various housing segments, the detached category continues to show strength, with a monthly increase of $9,326 and a year-over-year gain of $77,674. New listings in October were up noticeably compared to the 12-year low reported in October 2022, but up more modestly compared to the 10-year average for October. | |
The Average selling price was up on year-over-year basis by 3.5% | | |
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The average price remained above the cyclical lows experienced at the beginning of 2023 |
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The resilience of the GTA market is offering confidence to both prospective homebuyers and investors as it appears that the housing market remains highly attractive and is resilient to the prevailing economic challenges. “Competition between buyers remained strong enough to keep the average selling price above last year’s level in October and above the cyclical lows experienced in the first quarter of this year. The Bank of Canada also noted this resilience in its October statement. However, home prices remain well-below their record peak reached at the beginning of 2022, so lower home prices have mitigated the impact of higher borrowing costs to a certain degree,” said TRREB Chief Market Analyst Jason Mercer. | |
Borrowers shopping for a more competitive rate, are still forced to unrealistically qualify at rates approaching 8% | | |
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“In the current environment of extremely high borrowing costs, it is disappointing to see that there has been no relief for uninsured mortgage holders reaching the end of their current term - TRREB CEO John DiMichele |
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Following their most recent round of consultations, the Office of the Superintendent of Financial Institutions should have eliminated this qualification rule for those renewing their mortgages with a different institution,” continued DiMichele. A new survey suggests that a majority of Ontarians who will be renewing their mortgages in the next 18 months are worried about costs going up. The Royal LePage survey conducted by Nanos found that 21 per cent of respondents in Ontario will be renewing lease agreements within the next year and another 15 per cent will be up for renewal 12 to 18 months from now. Of those, 74 per cent are worried about it, given the series of rate hikes from the Bank of Canada Of those concerned about renewing, more than a quarter of respondents said they have considered either extending the amortization period (28 per cent) or switching lenders (27 per cent). Twenty per cent said they might extend their mortgage term, while 16 per cent said they are considering reducing the next term. Fifteen per cent might switch to a fixed-rate mortgage and 16 per cent said they might switch to a variable rate mortgage. | |
Canadians will likely have to wait until next summer for interest rate cuts: CIBC's Benjamin Tal | | |
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But the central bank could cut rates before inflation gets to 2% target |
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Rising rates have had put a strain on homeowners with variable-rate mortgages in particular. Forty six per cent of variable-rate or hybrid mortgage holders in Ontario said that the higher interest rates have put major financial strain on their household, while 30 per cent said it was a minor strain. The strain has meant cutting back on spending. Fifty-four per cent said they've cut back on discretionary spending like travel and going out to eat, but 52 per cent also said they're cutting back on essentials like groceries and utilities. Many people (45 per cent) are putting less of their income into savings. Forty per cent have had to dip into savings to cover expenses. None of the respondents in Ontario said they've skipped a mortgage payment, but five per cent said they're now selling their homes. Royal LePage says that while fixed-rate holders have dodged some of this strain in the last year and a half, it won't last forever. Canadians anxious for lower interest rates, especially those looking to renegotiate their mortgages in the near future, will likely have to wait until the middle of next year for the Bank of Canada to start to cut, CIBC economist Benjamin Tal believes. “I think they will take their time before they cut interest rates — not before June or July of next year...That’s another way of tightening, just keep high interest rates for longer.” | |
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Toronto Real Estate Board (TREB); All information deemed reliable but not guaranteed. All properties are subject to prior sale, change or withdrawal. Neither listing broker(s) or information provider(s) shall be responsible for any typographical errors, misinformation, misprints and shall be held totally harmless. Listing(s) information is provided for consumer's personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested