As we approach Christmas, it is important to reflect on the significant year that this was. We finally saw interest rates start to go up after years of them sitting at historic lows. Many of us were patiently waiting for this to happen as the market had become too heavily in favor of the sellers. In the GTA, income properties were flying off the shelves, often with no regard to the revenue or returns. It became a fool’s errand to expect any sort of fiscal return on some of these sales based on what people had been paying. Cap rates under 2% was not uncommon. Clearly something had to break.
As the summer wore on, interest rates started to be raised with regularity and almost immediately the market reacted. Multiple offers quickly slowed down and it seemed like some properties, for the first time in years would not sell. The real estate experts were predicting that prices would start to significantly drop, and some evenness would finally return to the market.
The number of sales slowed down for sure, but it did not seem like overall prices were plummeting. The major price correction that we were waiting for did not happen, at least not in the core of the city. The demand was definitely less but some income property prices in more desirable neighbourhoods have held firm. Certainly, the amount of time that properties were sitting on the market was longer, but ultimately there hasn’t been any significant reduction in investment property prices across the board. At least not yet.
There has also been an income property inventory shortage in downtown Toronto over the past couple of months. The change in market conditions has led some sellers to wait and see what 2023 may bring. Since this has been a transitional year some investors are likely to let the dust settle before making any significant real estate purchases. I know we are in an evolving market, and it often makes sense to wait it out and see where things land, but many of us have to move forward regardless of rates and prices.
I would like to wish you and your family a very Merry Christmas and all the best for a safe and prosperous new year. I will be back in 2023 with my quarterly newsletters and am also happy to chat with you at any time about income properties and residential real estate investing in Toronto.
2022 Toronto Income Property Market Wrap-up (Jan to Dec 2022)
Before & After the Interest Rates Shift
An in-depth analysis of sales data in key Toronto neighboorhoods before and after the interest rate increases