Ontario Housing Market Report
- Average home prices in Ontario have increasedby 21% in a year to$1,052,920
Average Home Prices in Ontario for March 2022
Historical Average Home Prices in Ontario
Ontario Housing Market as of March 2022
For March 2022, the average price of a home in Ontario increased 21% year-over-year to $1,052,920 while it decreased by 3.1% month-over-month. This means that the average home price in Ontario has increased by $183,130 in one year when compared to March 2021’s average price of $869,790. There were 24,409 units sold in March 2022 in Ontario. This is a 25% decline from March 2021 but still 12% above the 5 year average. Home sales totalled 56,137 in Q1 2022 which is an 18% decrease from Q1 2021, but still shows an active market. There were 39,772 new residential listings in March 2022 which is 11% lower than March 2021 but still 13% higher than the five-year average.
Rising home prices across the province can also be seen in Ontario’s major housing markets. Average sold prices in Toronto, Hamilton, Ottawa, and Mississauga broke all-time records in February 2022, but they witnessed small moderation in March 2022. For other major Ontario housing markets, home prices are all up year-over-year with percentage gains in the double-digits.
A common pattern seen among major Ontario cities is the notably lower transaction numbers compared to the same month last year. Home sales in Toronto are down by 22% year-over-year at 3981 units. London home sales are only down 19% year-over-year at 1049 units. Ottawa’s housing market had a 12% decrease in sales year-over-year at 2011 units, while Hamilton home sales were down 24% year-over-year at 984 units. Mississauga home sales totaled 1059 in March, declining 25% year-over-year, but still 12.5% above the five-year average.
Ranking Ontario’s major urban housing markets in terms of annual price growth for March 2022, London led the way with a 30% year-over-year increase in average sold prices currently standing at $823,950. Next up was Brampton with 28% year-over-year rise reaching an average home price of $1,310,790. Hamilton with a 25% year-over-year increase followed closely; it has an average home sold price of $1,003,190. Toronto prices had a 12.5% year-over-year increase reaching $1,218,550. The average price of homes sold in Mississauga and Markham during March 2022 were, respectively, $1,182,420 and $1,433,260, each advancing 11.3% from March 2021. Ottawa lagged behind with an 11% year-over-year increase reaching $757,230.
Toronto, Hamilton, Mississauga, Brampton and Markham all have average sold prices above the $1 million mark this month. The Ottawa and London housing markets remain cheaper alternatives to the GTA’s expensive home prices.
Looking at year-over-year price increases in other areas of Ontario, Windsor-Essex average home prices reached $723,740 up 35%, Sudbury home prices reached $504,110 up 29%, Thunder Bay home prices reached $358,270 up 25%, Sault Ste. Marie benchmark home prices reached $296,400 up 48%, North Bay benchmark home prices reached $451,700 up 43%, Cornwall home prices reached $426,110 up 18%, Barrie benchmark home prices reached $958,400 up 36%, and Kingston benchmark home prices reached $641,200 up 32% year-over-year.
The monthly decrease in average Ontario home prices raises an important question: Is this the beginning of a correction (defined as a 10% to 20% price decline from a recent peak) in Ontario home prices or just a small aberration in an upward trend? Ontario home prices are quite unaffordable both in comparison to the rest of Canada (with the exception of Southern BC) and also in comparison to Ontario’s historic trends. Thus naturally many aspiring home buyers are wishing for a correction.
Looking at Canadian interest rates you can see a long declining trend from 1981 to the present. In finance, the value of each financial asset like real estate, bond or stock is the present value of all cash flows from that asset. Interest rate is the exchange rate which relates the value of money at one time to the value of money at another time; just as foreign exchange rates relate the value of two different currencies at the same time.
Over the past 30 years globalization has acted as a very powerful deflationary force. In response, central banks have pushed interest rates lower in order to ensure that deflation would not materialize. In the aftermath of the 2008 financial crisis, western central banks printed unprecedented volumes of money and, later on, some even tried and got away with using negative policy rates. These experiences boost central bankers' confidence such that at the very start of the Covid crisis they went back to suppressing interest rates and quantitative easing (printing large quantities of money). Based on the experience of the last decade they expected no ramification and dismissed the initial rise in inflation (about one year ago) as being transitory due to supply chain disruptions.
Recently there have been signs of globalization going into reverse as a result of rise in nationalist and protectionist sentiment. But the restrictions stemming from covid and then the Russia-Ukraine war of 2022 materially pushed back globalization. This reversal has shown itself in sudden rises in inflation, for example, Canada's inflation rate has reached 6.7% which is the highest rise in CPI since 1991. Given the central banks mandate to keep inflation low and stable they have to increase interest rates. This process has just started. Over the past two months, the Bank of Canada has raised its policy rate by a multiple of 4 from 0.25% to 1%. Unless in the near future peace is established and the move towards globalization starts again, we expect a continuation of inflationary pressures and further raises in interest rates. Such raises in interest rates reduce the present value of various financial assets including real estate. As a result, corrections for various financial assets including real estate looks quite likely.
The expansion of the CMHC First-Time Home Buyer Incentive in the Toronto CMA, which spans most of the Golden Horseshoe Region, is likely to provide a small boost to housing demand for sub-$700K properties in the GTA. In addition, the CMHC recently adjusted their standards for mortgage insurance in 2021, broadening the eligibility to allow more levered and lower credit applications. While insured mortgages are becoming a smaller proportion of total mortgage origination volume, this is still likely to help marginal buyers enter the market.
Counteracting these changes, the Office of the Superintendent of Financial Institutions (OSFI) raised the benchmark rate for the mortgage stress test in 2021. This is expected to limit the affordability of both insured and uninsured borrowers.
Housing Markets of Major Cities in Ontario
| City | Average Home Prices (March 2022) | Population (2016) |
|---|---|---|
| Toronto | 2,731,571 4.5% vs. 2011 | |
| Ottawa | 934,243 5.8% vs. 2011 | |
| Hamilton | 536,917 3.3% vs. 2011 | |
| London | 383,822 4.8% vs. 2011 |
Ontario Housing Market Forecast for 2022
Looking forward, Ontario’s housing market forecast for 2022 depends on a few factors. The primary trigger for a downturn in prices is interest rates, while increased numbers of newcomers will have an upward pressure on prices.
Low mortgage rates have helped to stoke demand and have contributed largely to the massive price increases over the past year. Demand has been fueled by such abnormally low mortgage rates, breaking record-lows in fact, which makes it cheaper for buyers to borrow money. This period of low interest rates is set to end as the Bank of Canada signals that interest rates will eventually increase over the next few years. The impact of a jump in mortgage rates is still up in the air, as it is still not certain exactly how much interest rates will increase by. However, inflation has been creeping upwards, which signals that rates will surely go up, not down.
Immigration, looking mainly at newcomers and international students, has been largely absent throughout much of 2020 and 2021. This is also set to change as schools open back up to foreign students and immigration returns to normal levels. More people looking for a home will boost demand, especially as we head into the fall. Met with a shortage in housing inventory, a surge in buyers will introduce upward pressure on housing prices.
Two factors are now at play: whether an interest rate hike will become the catalyst for a correction in housing prices or if higher immigration levels will be enough to boost demand to ward off a dip in buyers from increased rates. Other factors include unknown policy changes emanating from the upcoming federal election, such as policies affecting supply of housing, along with the rate of Canada’s post-pandemic recovery, population growth, and taxes.
Ontario’s Housing Market Forecast: Things to Watch
| Negative Impact | Positive Impact |
|---|---|
| Higher Interest Rates Government Policies: Mortgage Stress Test Changes Vacancy Tax and Foreign Speculation Tax Zoning and Increased Supply of Housing Rent Control | Higher Immigration Levels Housing Inventory Shortage Stronger Economic Recovery |
A look at house price forecasts by Canada’s major banks gives us a look at what they predict Ontario house prices will be in 2021 and 2022.
RBC predicts that Ontario home prices will increase 15.8% in 2021, and 3% in 2022. RBC also forecasts that home sales in Ontario will increase by 11.3% in 2021 and decrease by 20% in 2022.
TD predicts that Ontario average home prices will rise by 19.8% in 2021 before falling 1.3% in 2022. For Ontario home sales, TD forecasts a 17.4% increase for 2021 and a 16.7% decrease in 2022.
Ontario Housing Market Forecast 2021 and 2022
| Forecast By: | 2021 Price Growth | 2022 Price Growth |
|---|---|---|
| RBC | 15.8% | 3% |
| TD | 19.8% | -1.3% |
Housing Markets Across Canada
Data sourced from the Toronto Regional Real Estate Board (TRREB) and the Canadian Real Estate Association (CREA). Any analysis or commentary is the opinion of the analysts at WOWA.ca and should not be construed as investment advice. Please consult a licensed real estate professional before making a real estate investment decision. The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA.