Toronto's Real Estate Market in 2022 was a rocky journey. The Bank of Canada's late correction to deal with inflation by raising interest rates caused a market correction that many could not foresee. Sales and prices dropped to levels we haven't seen since 2008! So what will Toronto's real estate market forecast look like for 2023? We asked economist and Broker of Record, Jamie Johnson of RE/MAX Condos Plus in Toronto his top predictions for the new year.
A Balanced Market
Don't expect real estate prices to fall much further. Toronto is finally in a balanced market and we hope it stays that way. The only way you would see further (significant) price drops are if Ontario experiences an influx of Power or Sale properties on MLS. That's where mortgage lenders force borrowers in default to sell. Mortgage arrears are a lead indicator for 'power of sale' listings. More Power of Sale listings equals lower prices. Only 0.06% of mortgages in Ontario are in arrears. In comparison, the U.S. in 2008 was 7%.
Real Estate Sales
The number of Real Estate sales is always a lead indicator for price increases. 2022 had the lowest sales numbers in 10 years! In 2022 sales reported by the Toronto Regional Real Estate Board (TRREB) were 76,000. Down from 121,000 in 2021. The key indicator for what the market will look like for the remainder of the year will be determined by the sales numbers of March of this year
Mortgage Rates
Mortgage rates were a huge topic of discussion in 2022. This year, look for mortgage rates to stabilize (Phew) and then trend lower in the latter half of the year. The Bank of Canada will be forced to modify its position to deal with the rising unemployment numbers. The more severe the recession in 2023, the more interest rates will fall.
New Construction
New Condo buildings coming onto the market in 2023 will be more expensive than the current resale condo market. Unfortunately, affordable housing is still years away as everyone is still debating on the best way to make it a reality.
Immigration
Immigration will most likely have a huge impact on the Toronto real estate market. Expect immigration to increase to 450,000 plus this year. And most likely Toronto will feel the effects the most. This will put additional pressure on both the rental and sale markets.
Recession
There is no denying that we are heading into a recession. Some will say we're already there! While employment numbers still remain high, a look at the yield curve shows the severity ahead. A yield curve compares interest rates over various terms. In a normal market, long-term rates are higher than short-term rates. When it's reversed, that's a strong indicator that a recession is imminent.
