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As illustrated in the below chart (Figure 8), at the end of December 2022, there were 3,720 detached properties available for sale across all TRREB regions. While this was up significantly from December 2021, it still remained below the five- and ten-year December average.

From a months of inventory (MOI) perspective, given the drop in sales, detached MOI climbed
to 2.8 in December 2022 (MOI trend figures as well as MOI vs. average price correlations are available on request). We believe that once interest rates plateau, and the economic fog starts to lift, sales volumes will increase and MOI conditions will start to tighten. This should keep detached prices relatively flat on a month-to-month (add the underline) basis over the near term, with possible upward price pressure by mid/ late 2023. (Note: year-over-year prices will look dismal during Q1/2023 as prices will be compared against the Q1/2022 peak).

Shifting to condos, the number of condo active listings at the end of December 2022 was 3,430, also up significantly from December 2021 (1,488). On a historical basis, condo active listings were above the 3, 5, and 10 year averages and hit the highest point for a December since 2016 as illustrated in the below chart (Figure 9).

Given the pace of sales is at a 10 year low (and months of inventory is near a 10 year high at 3.6 months), condos could face flat or decreasing price pressure on a month-to-month basis over the near term, which could provide a potential buying opportunity for investors or those looking to enter the market. However, any headwinds are anticipated to be for the short term as condos have a significant number of med/long term tailwinds as outlined on the next page.

• Immigration. We welcomed 431,000 new permanent residents to Canada in 2022 and that number is expected to grow to 500,000 by 2025.
• Affordability. As condos have a lower average price than other property types, they are the entry point for many buyers, resulting in a steady flow of demand.
• Rental Market. From an investor perspective, condo rents have increased significantly, which helps to offset the higher interest rate costs. December 2022 average condo rents ($2,740/mth) across the GTA were up 14.9% vs. December 2021 ($2,016/mth).

Short Term Headwinds:

• Entering 2023 with a relatively high inventory (active listings).
• Potential for additional supply from investors if they decide to sell their units, given the increased carrying costs as a result of higher interest rates.
• Additional inventory that could come from a record year of new condo completions. In fact, 32,000 newly built condos are expected to register in 2023, surpassing the previous record of 22,000 in 2020. Given the majority of these new construction condos were purchased by investors when interest rates were much lower, many of these units could hit the resale market shortly after registering, or end up in the rental market for a short term, and then potentially be sold in 2024.

To close out this report, we have listed some of the macro level topics that we’re monitoring as we progress through 2023 as they could have an oversized impact on housing results.

1 – Interest rates. We anticipate one final 0.25% increase by the Bank of Canada (BoC) at either their January 25th or March 8th meeting. Following the increase, we expect the BoC will pause until either December 2023 or early 2024 when they will start to unwind some of the increases they put in place during 2022. For more information on our outlook, please refer to our full year mortgage outline report.

2 – Immigration. Big targets and big potential for housing from both a resale and rental market perspective.

3 – The stock market. 2022 was a tough time for those invested in the stock market. Many people may have lost some of their down payment savings and felt less wealthy than they did in 2021. If the stock market turns around in 2023, it could help drive more activity into the housing market.

4 – Ongoing risks given the current political environment and the ongoing pandemic progression. 5 – Return to work policies. As return to work policies evolve, it could have a significant impact on sales patterns between the 416, 905, and various neighbourhoods and property types.

6 – Mortgage Regulations. OSFI recently announced that they are reviewing mortgage policies for potential further tightening measures. For more on this, please refer to our full year mortgage outline report.

Overall, a significant amount of uncertainty remains across many aspects of the GTA real estate market as we enter 2023. We believe that as buyers and sellers gain more clarity on even some of the above items, it will create more confidence in the market and volumes will begin to increase. Depending on the timing of this increase, the price trajectory could vary significantly, however, the first step will be getting people back into the market.