Toronto home sales down 41% from 2021!
The market downturn has started!
I’m sure you’ve seen all these alarming headlines over the last week.
Is the market really going to collapse?
Let’s dig in.
I’m going to share 2 reports with you today.
The first one is the Toronto Real Estate Board April Market Watch Report.
And the second one is the Bank of Canada April Monetary Policy Report.
Let’s start with the Market Watch.
Overall, sales activity decreased 41% in April 2022 compared to April last year.
What about March versus April this year?
Sales volume was down 27% in just 1 month.
How about the price?
The average price was still up 15% in April this year compared to April last year.
Compared to March this year, down 3.5%.
Overall, sales volume is significantly down and prices are just slightly down.
These symptoms are very similar to the ones we saw during the first few months when Covid first started.
Whether it’s government policy changes, rate hikes or Covid, they all mean uncertainties.
And uncertainties create fear.
Everyone is afraid to take any actions and they all step to the sidelines to wait and see.
That’s why sales volume is significantly down.
And I expect the market to stay pretty quiet for another couple months because another rate hike is coming in June.
In terms of prices though, they are still pretty solid, no one is panic selling.
I would say in general, people are confident about the longer term outlook of the market.
The market sentiment is very much like the beginning of Covid.
It would be interesting to see whether the quietness in the market would create pent-up demand once again and result in another rush to buy once the interest rate hike stabilizes.
For now, let’s get back to the report because I want to share some interesting trends.
#1 Biggest Hit in 905 Area
The 905 area saw the biggest gain over the past 2 years as people moved further away from the city centre.
As expected, it is now experiencing a bigger than average price drop because people are heading back to downtown offices.
Sales volume was down roughly 30% from March to April across all home types.
Detached home average price was down 6.5% to around $1.53 million dollars.
Townhouses, down 7.6% to just under a million dollars.
Condos, down 5% to around $723,000.
#2 Solid Prices in 416 Area
The 416 area is also seeing a 20 to 30% drop in sales volume.
But in terms of prices, detached homes were actually slightly up!
The average price of a detached home is now $1.95 million dollars, up 1.5% from March.
Townhouses are down 2.7% to $1.09 million dollars.
Condos, slightly down 1.3% to $821,000.
You see, I would say the market is shifting rather than collapsing.
I think we would continue to see a shift from 905 back to 416 and a shift from low rise to high rise as we enter the new endemic era.
Overall, the housing market is going to stay very robust for 2 reasons.
#1 High Immigration Levels
We have talked about immigration being a solution to Canada’s aging population, so high immigration levels will continue to be a trend.
New immigrants will need a place to stay and therefore create housing demands.
I saw some interesting comments from my previous video.
Not every immigrant is going to buy!
It is definitely true and I have never said that every immigrant is going to buy a property.
But everyone does need a place to stay, doesn’t matter whether it’s rent or buy, that’s still housing demand.
Someone needs to own a unit for someone else to rent it, right?
I will put a link to my previous video at the description below in case you haven’t watched it.
#2 An Excess Demand Economy
The April Monetary Policy Report from the Bank of Canada is telling us some interesting trends.
Our labour market conditions are actually very tight.
Employment and total hours worked have already surpassed pre-pandemic levels.
Wage growth has risen to near pre-pandemic levels.
Companies are actually experiencing difficulty attracting and retaining staff.
A strong labour market is a reflection of our super strong economic recovery.
The report says that consumer spending, exports and business investment are projected to grow solidly.
And our economy is actually starting to operate beyond its productive capacity, which means we cannot produce enough to satisfy all the demands.
That’s why with the robust growth expected in the second quarter, our economy is moving into excess demand.
Higher interest rates would help us out a little here.
They should slow down spending and gradually reduce excess demand in the economy.
You see, our economy is so strong that we actually have to slow it down.
Same thing with our housing market.
We have some good problems to deal with.
So like I always say, you can see this quiet time as a bad thing, or a good thing.
Crisis or opportunity, it’s all up to you.
The bottom line is we have a very strong economy, robust employment and high immigration levels to back up the housing market.
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