The average price of a house in Ontario is declining as the province’s housing market contends with increasing interest rates and declining demand. The average Ontario house price in September 2022 was $836,300, down 5.7% year-over-year but up 0.8% month-over-month. This price is 23% less than February 2022’s top price of $1,086,490.
The impact of interest rates on housing values is both fundamental and technical. Fundamentally, from a financial standpoint, the value of a home equals the present value of the net rent that the house will earn for the remainder of its life, plus the present value of its salvage value at the end of its life. The net rent is the rent charged less any expenditures associated with maintaining the home in livable condition for the renter. Higher interest rates result in a greater discount being applied to future cash flows, hence decreasing the value of each residence.
Greater Toronto Area (GTA) real estate market is the biggest and most significant in Ontario and Canada. During the months of August and September, prices increased somewhat, but were 19% less than the average price in February 2022 of $1,334,544. Annually, the average property price in the Greater Toronto Area falls by 4%. The top of the Ontario housing market’s average sold price occurred in February 2022, when it hit $1,086,493 on average. Since then, property prices in Ontario have decreased by 23% during the last seven months. The average price of a house sold in Ontario now is $250,000 less than it was at the market top in February 2022. This occurs during a time of aggressive rate rises by the Bank of Canada and increasing mortgage rates in Canada. During these seven months, prime rates in Canada more than doubled from 2.70 percent to 5.45 percent.
As the property market in Ontario cools, it is common for the number of transactions in Ontario’s main cities to decrease dramatically compared to the same month previous year. Toronto’s housing market is seeing a 44% decline in home sales year-over-year, while Ottawa’s housing market is experiencing a 33% decline. The property market in Hamilton has similarly slumped, with sales activity down 42% year-over-year. Mississauga house sales are down 46% year-over-year, while Brampton home sales are down 53% compared to the previous year.
Brampton topped the list of Ontario’s main metropolitan housing markets for yearly price reduction in September 2022, with a 6% year-over-year decline in average sold prices. The Greater Toronto Area followed with a 4% year-over-year price decline. The year-over-year reduction in Hamilton house prices was 2%, while the year-over-year fall in London, Ontario home prices was just 1%. The average sold price on Mississauga’s property market remains unchanged year over year. Only the housing market in Ottawa grew by 1% annually.
Nonetheless, Ontario homes remain overpriced in comparison to other Canadian property markets, such as Alberta’s. For example, the average selling price of a property in Edmonton is $375,000, whereas the average sale price in Calgary is $50,000. Regarding the province of Alberta, the average selling price is $432k. With an average property price of $927k, the British Columbia real estate market is even less affordable than Ontario. This month, Toronto, Mississauga, and Brampton all continue to have average sales prices over $1 million, though only narrowly. The average house price in Toronto’s housing market for September 2022 was $1,062k for the City of Toronto, representing a 3% monthly rise, and $1,087k for the Greater Toronto Area, representing a 1% monthly increase. The average selling price in Brampton was $1,007k, a monthly drop of 1%. Mississauga rounded out the top three with an average sales price of $1,033k in September, which was 4% less than in August 2022.
The Hamilton and Ottawa property sectors remain less costly alternatives to the Greater Toronto Area’s pricey housing market. In September 2022, the average sold price in Hamilton was $783k, down 1% from August, while the average sold price in Ottawa was $644k, up 1.3% monthly. With an average price of $629k, real estate in London, Ontario continues to be quite reasonable. Looking at year-over-year price increases in the rest of the province, some Ontario housing markets continue to experience intriguing annual price fluctuations when examining average prices. The average property price in Thunder Bay was $318k, an increase of 6.5% year. In the meanwhile, housing prices in Cornwall rose 10% annually to $418k. Sarnia-Lambton house prices are up 6% to $535,000, while York Region home prices are down 8.3% to $1,239,500, Timmins home prices are up 9.5% to $250,000, and Orangeville home prices are up 6.5% to $806,500.