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How was the Toronto real estate market in September 2022?

In early September, we saw another rate hike.

Did it kill the real estate market?

There are 5 key points we should pay attention to in the September market report.

#1 Desire to Buy is Low

As expected, another rate hike continues to mute demand.

Sales volume dropped 44% compared to September 2021 and was still down 10.5% compared to last month.

People are just not in the mood to buy.

So is the market flooded with crying sellers now?

Not really.

#2 Desire to Sell is Also Low

People are not in the mood to sell either.

The number of new listings in September was the lowest September number since 2002, it’s a new 20-year low.

People are not desperately selling because the interest rates are higher.

This really tells you how strong the Toronto market is because it’s backed by real demands.

People need a place to live, they can’t sell their place just because they need to pay more mortgage interests.

They might extend their amortization years so they keep the same monthly payments or they might cut expenses elsewhere.

People who were thinking about upgrading to a nicer place may just decide to stay now.

Investors have no urgency to sell either because they keep collecting rents. It’s not like their units are vacant.

#3 Prices are Stabilizing

In September, detached home average prices were just down 0.7% compared to August.

Condo prices were actually up 2.7%.

The increase was even more noticeable in downtown condos, with average prices up 4.4% from August to September.

Buyers don’t want to buy, but sellers don’t want to sell either.

That’s why we’re seeing some support on prices here.

#4 Rental Market is Hot

The second quarter rental market report shows that average rents are now at record high levels, surpassing the previous peak in 2019.

The average rent for studios is now at $1,829, up 25.1% from a year ago.

1 bedroom, $2,269, up 20.2%.

2 bedroom, $2,979, up 15.3%.

You see, this is exactly why investors have no urgency to sell.

The increase in rent is going to cover that increase in interest payment.

#5 Supply Shortage is Hidden

Over the past couple months, sales volume has been very low and that creates an illusion that we are in a balanced market.

It seems like the low supply is enough to satisfy the low demand.

When in fact, demand is really just suppressed at the moment, people are just not in the buying mood right now.

The supply shortage that we were concerned about has definitely not gone away, it’s just being masked by the temporary dip in demand.

The signs that we are seeing right now are very much like the first 6 months when the pandemic emerged in 2020.

The market was very quiet, on both the buyer and seller ends, no one felt like making a transaction.

Prices were dropping a little bit, but were more or less frozen in general.

Then once people accepted and adapted to the new normal, the suppressed demands exploded.

We all saw what happened, fierce bidding wars drove crazy prices.

Now, demand is suppressed once again.

Supply is slowing down because new constructions are taking longer to start due to slower sales.

As with every big change in life, it takes people roughly 6 to 12 months to adapt to it.

Once people have accepted and adapted to the higher interest rate, suppressed demand will explode, that’s my prediction.

Now, I’m not saying that this would happen with every market out there.

Only to a market that has the population growth to create that housing demand.

And that’s the Toronto housing market.

It’s going to be very interesting to see how the market evolves, subscribe and hit the bell so you always stay on top of the market.


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