A Review of Ontario's Housing Market in 2023

This report will begin with an overview of activity amongst all buyer segments in Ontario from 2011 to 2023. Multi-property owners have significantly increased their representation to almost a quarter of the market in recent years, accounting for 25.2% of all property transactions at its peak in 2022 before settling down to 23.7% in 2023. Since 2011, first-time homebuyers have consistently represented 20%-25% of the purchasing market. Similarly, life event transactions have remained fairly stable across time, but vary as a percentage of total transactions from 17.6% in 2011 to 21.3% in 2023. While there were many reports about the activity of movers during the pandemic, they have consistently remained one of the smallest (and in some years the smallest) buyer segments, with a significant drop in transaction activity in both 2022 and 2023 as interest rates rose.

Since 2011, condo property purchases (Figure 2A) have been dominated by the first-time homebuyer and multi-property owner buyer segments, accounting for 28% and 30% respectively in 2023. This trend may be due to the relatively lower prices of condos being more attractive to these buyer segments. On the other hand, non-condo purchases have been more balanced between all buyer segments within a fairly small range of 15.4% (purchased by the mover segment) to 24.5% (purchased by the life event segment) in 2023.

In recent years, trends relating to the number of parties registered on title have reflected the state of affordability in the real estate market. In 2016, following the introduction of the mortgage stress test, a period of decline in solo transactions and a corresponding increase of two-party transactions ensued. Historically, less than 5% of transactions have been made by parties of 3 and more, although we can observe a slight increase in these groups over time to just under 8% in 2023. These may be indications that individuals are increasingly having to pool funds and credit together for home ownership.

To assess the magnitude of multi-generation purchases in Ontario, we measured the maximum age gap between parties in multi-party purchases. The vast majority of multi-party transactions are between parties within 20 years of age. There is a small, but growing, portion of transactions between parties greater than 20 years, which may be indicative of multi-generation purchases, a phenomenon that is more pronounced and growing in Toronto versus the rest of the province.

The majority of multi-property owners in Ontario have only two properties in their portfolios, suggestive of “passive” holdings instead of an active business venture for the purpose of income generation. While multi-property owners are continuing to make purchases, many portfolios have shrunk in size since April 2022. Multi-property owners with more than 11 properties accounted for 13% of all multi-property owner holdings in April 2022, but that has since decreased to 7.6% by the end of 2023. This observation may be indicative of profitability on investment holdings against a backdrop of rising rates since early 2022.

In analyzing 2013 to 2023 data on the ages of first-time homebuyers at the time of purchase, we can observe that they are entering the housing market later in life, potentially another indicator of affordability challenges in Ontario. In 2013, 50% of first-time homebuyer transactions came from those aged 35 and younger. By 2018, 50% of first-time homebuyer transactions came from those 38 and younger, and by 2023, it has increased to 39 years of age.

Since 2011, the vast majority of the mover segment were those moving within the same region in Ontario, however this segment has been shrinking over time, from 70% to just under 60% by 2023. Those who moved from outside of the GTA to another area outside of the GTA has doubled in the last 10 years. Another small but growing segment were the movers that migrated from the GTA to outside of the GTA, from 6.5% to 11.1% of total Ontario mover activity by 2023. Its growth was particularly pronounced during the Covid-19 pandemic, where it peaked at 12.7% of total Ontario mover activities. And despite some headlines of urbanites who left the city during the pandemic and moving back as we return to normal, the portion of those moving from outside of the GTA to the GTA remain a very small segment at 2% and did not significantly increase post-pandemic.

The migration patterns that we have observed since 2011 correlates highly with the location of new housing stock across the province. Over time there has been a declining proportion of new homes within the GTA, with a significant decline in York and Peel regions. On the other hand, the Simcoe and Waterloo regions have seen an increase in new housing stock.

In this section of the report we will shift our focus from purchasing trends to selling behaviour in Ontario. Within the past year the sentiment of uncertainty amongst Canadians with regards to the real estate market has been widely discussed, which appears to be evident in the length of holding periods. Holding period in this case is measured by the number of years the property was held at the point of sale. Ontario non-condo properties are held between 10 and 12 years on average, and as expected, condo properties are held for much shorter periods, between 6 and 8 years; both are increasing in length, albeit slightly, over the past 10 years.

Regionally, Toronto has one of the highest holding periods for non-condo properties in Ontario at 14.9 years for sales in the ten years to 2023, compared to surrounding regions of Peel at 9.2 years and York at 9 years. This observation may be indicative of Toronto homeowners’ preferences for urban and/or choices to upgrade existing home to meet changing needs.

Since the series of rate increases beginning in Spring 2022 and carrying costs increasing correspondingly, accounts of distressed property sales were rampant. Through our data, we have observed a recent increase in the proportion of properties that were sold within one to three years of ownership. While this was only a slight uptick from 17.8% in 2021 to 19.6% of all sales in 2023, it may be an early indication of homeowner stress who purchased their properties at the price peak of 2021 and 2022.

Another indication of market stress may be visible in the recent trend in which properties recently purchased and sold are incurring losses at much higher rates than historical averages. As an example, of Ontario properties purchased in 2022 and sold within the same year, 9.5% were sold at a loss; of properties purchased in 2022 and sold in 2023, 18% were sold at a loss, where the historical averages were closer to 2% to 4% (Figure 12A). When we look at this from a regional perspective (Figure 12B), of properties purchased in 2022 and sold by 2023, 11.3% of Toronto properties sold at a loss, faring better than most other regions, while Muskoka saw the highest rates of loss at 28.1%.