Springtime Scarcity: GTA Property Listings Plunge By Nearly 45%

Typically, the spring is when a wave of new listings flood the GTA real estate market. After all, it’s the annual release of pent-up anticipation following a cold, dreadful winter. Sellers, keen on showcasing their homes when the garden is about to bloom, are capitalizing on ambitious buyers just itching to get back out there.

But this spring is different. After eight months of inaction following a series of ambitious interest rate hikes — you’d think sellers would be flooding the market, dying to get their homes up for sale. Although there has been an uptick in new listings, it’s nothing like what we traditionally see during the season.

New listings plummet to lowest in two years

This spring, the GTA housing market saw its biggest drop in new listings in two years. In March 2021, for instance, 22,626 houses and condos came up for sale. It was a surge of new inventory, typical of a spring market, but also following a year of pandemic restrictions. The following March was no different with 19,969 new listings — coinciding with a peak in overall property prices.

But when the Bank of Canada embarked on its journey to raise interest rates last June, sales dwindled as did real estate values. By the end of 2022, condo transactions had dropped by 45% and freeholds by 56%. Following one of the most aggressive rate hikes in Canadian history, the central bank finally signalled a conditional pause on increases after the latest one in January.

With optimism in the air, many realtors had expected a surge of sellers to emerge this spring with fresh properties for an eager throng of buyers. But Strata.ca data shows new listings are nowhere near the levels we saw in years past.

In March, only 11,200 properties were listed — a 44% drop from one year prior. Not only has this inventory problem resulted in a more competitive market, but it’s one of the main factors keeping GTA real estate prices propped up. Although property values took a beating during the back-half of 2022, it appears they hit ‘rock bottom’ in January and are trending upwards ever since. Right now, the average price of a house is just shy of $1.4M, and a typical condo is selling for $751,000. That’s a 2.8% and 6% increase respectively in just three months.

Must sell ‘at a number that makes sense’

Lower inventory levels would imply many sellers are hesitant to list at this time. But those who do list may end up with favourable outcomes, especially if they’re trying to sell a freehold. Houses are typically selling within 14 days with buyers, on average, paying 7% above the listing price. Condos, meanwhile, are selling within 22 days at an average of 2% above list.

Cliff Liu, a broker at Strata, says the inventory data for new condo listings is in line with what he’s observed on the ground. “Condo owners looking to upgrade to a house are in a tricky dilemma,” he explains. “With competition so fierce for freeholds, they must sell their condo at a number that makes sense.”

“There’s also this feeling of uncertainty, given the stigma that higher interest rates have caused,” adds Strata agent, Cyrus Ghazvini. “There’s cold feet from both buyers and sellers because everyone is still adapting to these new rates.”

A buyer originally pre-approved for $1.8 million is now only approved for, let’s say, $1.2 million. And that consequently changes their expectations. “But if they must move, they’ll utilize whatever is given to them to make that happen,” Ghazvini explains.

Inventory crunch fuels standstill

Higher interest rates may have caused a standoff among buyers and sellers. But the GTA’s listing shortage, and thus a lack of options, has triggered a standstill within households unsure of their next move.

“I have a pair of clients who want to downsize, but are reluctant to put their house on the market,” says Liu, who explains that the couple wants a decently-sized condo in the same neighbourhood that they can see themselves living in for the next 20 years. “They just aren’t seeing enough listings that fit their criteria for them to feel comfortable putting their house up for sale.” So in turn, that’s one less house hitting the market this spring.

“Multiply this scenario among other households, and you run into the kind of inventory crunch we have today,” says Liu.

“Despite this problem,” adds Ghazvini, “many buyers still have this perception that they can get ‘deals’.” He often has to explain to clients that “the beautiful corner unit they want in a reputable condo and desirable neighbourhood will always sell well.” And as long as there are more buyers than available listings, he says, the chances of a deal become slim.

So what does this low inventory, coupled with higher interest rates, mean for GTA real estate? Well for starters, the terrain is ripe for a rental market that’s about to get even hotter.

“Despite bigger mortgage payments and shifting lifestyles, sellers who can stay afloat may hold out a while longer without having to list,” predicts Liu. “And many buyers, who either can’t afford to purchase or are discouraged by the lack of properties, will likely start looking at rentals.”

Fortunately, rental inventory compared to last year is actually up by 15%.