The housing market slowdown due to interest rate hikes has been felt most sharply in the suburbs of Toronto, where selling and selling prices head lower in the summer at a rapid pace.
After Torontonians flock to the suburbs, experts say the balloon fueling the pandemic outside the downtown core is beginning to deflate as the cost of borrowing rises and offices reopen.
Home prices rose 15 percent year-over-year in April across all markets, according to the Toronto Regional Real Estate Board (TRREB) on Wednesday. Selling prices for detached homes increased 17.5 percent, averaging $1.26 million in the suburbs, compared to $1.63 million in Toronto, with prices rising faster in the suburbs than in the heart of the city.
Prices in Toronto are up 14.3 percent year over year, while prices in the rest of the GTA are up 15.4 percent. Suburban housing units have risen faster than downtown units.
However, John Basalis, president of real estate brokerage Realosophy, said that although prices may go up year after year, they are slowing down month by month — and one only has to look at the past few months to get a better idea of what to do. Come.
For example, sales have fallen rapidly over the past six weeks or so, Basalis said, the opposite of what usually happens in the spring for real estate. Low number of buyers and offers combined with owners under selling pressure has led to lower prices along with sales.
According to TRREB, the median home sale price in the GTA fell 6.4 percent between March and April, and one percent between February and March, after nearly a year of only upward movement.
Year-over-year sales volumes are down — a whopping 41.2 percent from last April — and according to TRREB, the drop is even bigger outside of Toronto, especially for detached homes: In area code 905, sales are down nearly 45 percent. percent, with detached homes down more than 47 percent.
This abnormal trend indicates the coming effects of higher interest rates, Basalis said.
“I think as we get closer to the summer, we will probably feel the effects of slightly higher rates,” he said.
The same is happening downtown, Basalis said, but the change isn’t as severe, likely because prices haven’t been inflated by the pandemic as they were outside the city centre.
It’s also possible, he said, that there is a renewed interest in downtown living. After all, with gas prices skyrocketing and employers urging employees to return to the office, the benefits of a larger home in the suburbs may increasingly outweigh the cost of commuting.
Prices in some suburban areas have risen faster than others, year-over-year — like Durham, which saw average sales prices rise nearly 38 percent from April 2021 to April 2022.
Basalis said that which area is usually considered more affordable, such as Durham, it had more room to raise prices. He said younger families may have been drawn to those areas, driving up prices.
“A lot of young buyers looking for affordable housing went to Durham, and it really drove home prices up really fast,” he said.
Simeon Papillias, a broker at Royal LePage who specializes in real estate investment and co-founder of the Canadian Real Estate Center, said that after seeing the “905 rise” during the pandemic, the market is now in the process of adjusting.
“Now we’ll see 905 stable, and find their foundation,” he said.
He said “crazy” increases in certain areas of the GTA weren’t sustainable, so while homeowners and potential buyers might be looking on with concern, by fall the new normal will be evident.
He noted declining sales everywhere, but especially outside the downtown core: “We’re seeing downtown rise again.”
Pasalis said that while many home-hungry millennials were hoping prices would cool down, that doesn’t mean buying a home would be any less expensive right now. Cold house prices are offset by higher interest rates, which means borrowing becomes more expensive.
“Although prices are lower, the fact that interest rates are higher means that families can’t take on the same amount of debt, so they really can’t spend that much.”
Papilias noted that prices won’t necessarily drop in the suburbs, but they will slow significantly as prices continue to rise. After all, Canada still has a housing shortage that won’t end soon, he said, which has been exacerbated by supply chain issues and global events.
“The fundamentals haven’t changed at all,” he said.
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