The Toronto real estate market has slowed down since peaking last spring. While the average selling price for a home in North America’s fourth-largest city is north of $1 million, this market has seen the average price for a residential property tumble by approximately 25 percent since March of 2022.
Sales have also eased. According to the Toronto Regional Real Estate Board (TRREB), home sales plummeted 49 percent year-over-year in November, totaling just 4,544 units. New listings also slumped on a month-over-month and year-over-year basis.
Indeed, the Bank of Canada’s (BoC) rising interest rates are impacting everything, from mortgage costs to market demand. But this was not always the case.
Since the global financial crisis happened more than a decade ago, low-interest rates have fuelled the housing boom in some of Canada’s largest housing markets, including Toronto and Vancouver. The low-rate environment also led to a substantial high-rise construction boom, particularly in Toronto. Nearly every area in the municipality has seen an increase in the number of construction cranes.
But now that rates are rising, are the cranes coming down?
Toronto is North America’s Crane Capital
RLB, a global real estate consulting giant, recently published its third-quarter Crane Index. It found that Toronto has seen a modest pullback from its peak, although the total number of cranes in the city is still highly elevated. As a result, Toronto is the North American leader by a substantial margin.
Or, as Better Dwelling recently put it, “No other city on the continent even comes close.”
In the July-to-September period, Toronto had 230 construction cranes up in the air, down nine percent from the second quarter, when it posted a record high of 252 cranes.
Most of the high-rise construction is primarily residential, accounting for more than half of the construction projects. Housing experts note that the decline may continue amid lower pre-sale demand in Toronto.
So, what cities in North America are seeing more construction cranes in the sky? Here is a list of the top 10:
- Toronto, Ontario: 230
- Los Angeles, California: 46
- Seattle, Washington: 42
- Denver, Colorado: 32
- Washington, D.C.: 26
- Calgary, Alberta: 21
- Chicago, Illinois: 18
- Portland, Oregon: 15
- New York, New York: 14
- San Francisco, California: 14
There was a flurry of sales of pre-construction condos from 2019 to late 2021, but sales have eased in the last year. This may potentially contribute to a decline in construction cranes.
Will this bring prices down? Some industry observers are cautiously optimistic.
“We have seen a lot of progress this year on the housing supply and related governance files such as the More Homes Built Faster Act. This is obviously good news,” stated TRREB CEO John DiMichele. “However, we need these new policies to turn into results over the next year. Otherwise, the current market lull will soon be behind us, population growth will be accelerating, and we will have done nothing to account for our growing housing needs. The result would be enhanced unaffordability and reduced economic competitiveness.”
A Balanced Market in Toronto?
Here is something Torontonians have not heard in a long time: the Toronto real estate market is shifting into balance – for now – according to RE/MAX Canada’s 2023 Toronto Housing Market Outlook Report.
In fact, conditions are expected to shift into balance in 60 percent of the regions analyzed in the report.
With the Canadian central bank discussing slowing down the pace of rate hikes and the financial markets penciling in a rate cut in late 2023 and early 2024, could the Toronto housing market spike as it did during the COVID-19 public health crisis? Time will tell.
For now, balanced conditions are expected to continue in the Toronto housing market in 2023. Key trends impacting the market include interest rate fluctuations and associated price adjustments, rising unemployment due to an economic slowdown, and new opportunities to engage in the market for buyers and sellers due to improved affordability. For buyers, this includes less competition, reduced prices, and an increase in choices in the market. Meanwhile, sellers will also have a trade-up advantage, reduced competition of listings, and a greater ability to relocate to the suburbs.