Greater Toronto real estate has been slowing down, but the city seems to be slowing much faster. Toronto Regional Real Estate Board (TRREB) data shows mixed home price moves in August. Toronto’s suburbs, aka the 905, continued to print gains, while prices in the City fell. Both regions showed a second month of deceleration for the annual rate of growth as well — another sign of market moderation.
Home Prices Are Falling In Toronto, But Still Rising In The 905
The price of a typical home across Greater Toronto is seeing growth taper, but prices still advanced. The composite benchmark price reached $1,059,200 in August, up 0.46% ($4,900) from a month before. Compared to last year, prices are now a whopping 17.37% ($156,677) higher. City of Toronto real estate is normally booming, but it’s actually holding back prices for the rest of the Greater Region now.
Greater Toronto Benchmark Price
The price of a “typical” composite home across Greater Toronto.
Source: TRREB; Better Dwelling.
Home prices in the City of Toronto slipped a little lower last month. The composite benchmark price fell to $1,097,600 in August, down 0.45% ($5,000) from the previous month. Compared to last year, prices are now 9.26% ($93,023) higher. Huge gains over the past 12 months, but the City is greatly underperforming the suburbs.
Monthly Price Growth Soars In The 905, But Plummets In The City
The monthly movement showed growth across the Greater Region, but that’s exclusively a 905 story. Monthly gains across TRREB at 0.46% ($4,900) was the biggest monthly increase seen since May. As for the City, the decline of 0.45% ($5,000) last month is the largest since December of last year. This was right before the Bank of Canada (BoC) sparked a buying spree, after saying the overheated market activity was good, because “we need the growth.”
Both The 905 And The City Have Seen Annual Growth Slow
The annual rate of price growth is decelerating at a fairly rapid rate these days. For the Greater Region (TRREB), growth fell by nearly two-thirds of a point in a month. It was the second consecutive month to see deceleration, meaning a slowing price growth trend might be confirmed soon.
Greater Toronto Benchmark Price Change
The annual percent change of TRREB’s benchmark price for all home types.
Source: TRREB; Better Dwelling.
The City barely got to know double digit annual growth, before it’s already leaving. The 9.26% annual rate reported in August is almost a full point lower than the month before. It was the second consecutive month to see price growth deceleration. Only three months of double-digit annual growth was seen, and it’s begun to taper.
Greater Toronto real estate still shows some signs of divergence, but price growth slowing is consistent. The 905-region saw monthly price growth, but not enough to prevent the annual rate from showing a slowdown. In the City, prices contracted on a monthly basis, definitely putting a significant drag on the annual rate. This puts a smoking hole in the “sales are only falling because of low inventory” narrative. Tight inventory means price growth acceleration, not deceleration. The real estate industry stated they expected this kind of price movement earlier this year. Now that it’s here, much of the industry seems to have a collective case of amnesia.
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We’re likely to see this trend of real estate stagnation or bleeding value for the next 3-4 years. I suspect come 2024-2025 we may see some strong downside headwinds once everyone who leveraged up to the hilt during 2020 and early 2021 will now have to renew their mortgages at comparatively higher rates. Not to mention the onslaught of regulation that is likely to come from Canadians starting to prioritize housing affordability as a primary issue effecting quality of life in the country, and bringing that priority to the voting booth.
A 1% increase in mortgage rates from where they are now will make a mortgage payment on a 500k mortgage go up by 15%. Many people are simply gonna get wiped out.
Don’t forget, 21% of Canadian mortgages have variable and adjustable rates. When the BoC inevitably raises the rate, they’ll feel the effect right away with less of their payment going toward principal and more toward interest elongating the term. Depending on their age, this may push their mortgage past their retirement.
I don’t know if you actually done the math….. For a 500k mortgage the payment might increase by 300 dollars or so. Thats not going to push anyone off a edge. Not to mention most mortgages are stress tested for at least a 2% increase.
But all in all, Toronto is way over priced. It will probably see the most drops if prices do come down.
I mean you can use a basic mortgage calculator on any of the bank websites to see that it is a 15% increase ($2000 –> $2300) per monthly payment for a rate increase of 1.5% to 2.5%. Might not be devastating, but certainly has a large material impact on many borrowers out there.
Also, believe it or not, not all mortgages are stress tested at the qualifying rate. Many lending entities within Canada are exempt from that rule, including many credit unions and private lenders. Hell, these institutions can also lend at 50% TDSR as opposed to the 44% the large banks use. Unfortunately, I don’t know what the figures are regarding these “Subprime” mortgages currently – but I reckon that number has grown drastically in the past few years.
As per Better Dwelling, “Greater Toronto real estate still shows some signs of divergence, but price growth slowing is consistent.”
And
As per BNN, “the average selling price of a home in the Greater Toronto Area jumped 12.6 per cent from a year earlier to $1,070,911.”
One will report monthly and another will report yearly and this is how they continue to make headlines that attracts attention and increases confusion among general people.
All leads to anxiety, depression, pain attacks, FOMO. God bless.
As well there is economy depression, inflation, which will eat your cash flow. GDP has been dropped substantially and we will see. is government going to give free money again? Even there is no interest hiking, inflation will do the same effect on the mortgage payment. And with the current debt situation , government is Hungary for the money. They will raise the tax on all the corners of every economy, taxing on all area, such as, income tax, property tax, pension premium increase, etc… base on all these factors, the price of all Canada properties need readjusted to reflect real affordability.