Sales were on the up last month, but brokers are cautioning against reading too much into that increase
Greater Toronto Area (GTA) home sales posted their first yearly increase for six months in March – but there aren’t many in the mortgage industry who believe the housing market has turned a corner after a torrid winter.
Sales ticked up by 1.7% in March compared with the same time last year while new listings slumped by 16.7%, the Toronto Regional Real Estate Board (TRREB) said this week.
But prices also continued to slide – and the slight jump in sales isn’t exactly a sign that buyers are about to flood back into the market, according to 6ix Mortgages broker Taz Zaide (pictured top).
He told Canadian Mortgage Professional that several factors were likely to keep a lid on Toronto homebuying activity in the spring, not least the ongoing war in Iran and continuing unease over the economic outlook.
“It’s a good opportunity for buyers, but the only thing is that we found that a lot of buyers are still kind of on the fence – especially in the last week – since the war [in Iran] began,” he said. “There’s a lot of uncertainty with rates. Bond yields are going up again.
“Especially now, people are a little bit more fearful of jumping into the market, having to go into much higher rates than what were available even three weeks ago.”
March figures potentially indicate quick ‘sell-off’ by some owners
While sales were above their level from the same time last year, they’ve slid by 27.8% from March 2023 – and Zaide cautioned against reading too much into the annual increase.
The higher year-over-year purchase activity in March could reflect a “sell-off”, he said, as some sellers rush to list and offload their properties before prices slide even further.
A statistical uptick in activity doesn’t exactly signal that buyers are growing more confident about the market on the ground. “The word from brokers is that it’s been very, very dead in the last week or two weeks, where we’re barely seeing as many purchase transactions,” he said.
“Compared to last year, the stats speak differently. But it doesn’t truly reflect the numbers that we’re usually seeing, especially prior to the war. I think the war is a big driver of fear right now, [preventing] people jumping in and us having a very healthy spring market.”
That US-Israel-Iran war, which began at the end of February, has sent five-year Government of Canada bond yields – which heavily influence fixed mortgage rates – sharply higher in recent weeks and raised fresh questions about the Bank of Canada’s next moves.
For variable-rate holders and shoppers, the prospect of central bank interest rate cuts in the months ahead appears to have receded dramatically since the beginning of that conflict, mainly because higher oil prices have stirred fears of an inflation upsurge in the months ahead.
Some experts sceptical over prospects of a lasting US-Iran truce
Confusion over a fragile ceasefire continued on Thursday as Israel ramped up attacks on Lebanon and the Strait of Hormuz – a key oil shipping route whose closure has seen oil prices skyrocket in recent weeks – reportedly remained shut.
Even if that truce proves permanent, the outlook for the Canadian economy and housing market almost certainly won’t brighten immediately.
Servus Credit Union chief economist Charles St-Arnaud highlighted in an interview with CMP that oil price relief will likely take a while to work its way through to consumers, and Zaide sees little chance of a quick jump in homebuyer confidence this spring.
“The repercussions of the war will take a while to get over. It’s not like oil prices will go back down immediately,” he said. “So there will be certain factors that drive affordability down for people, and obviously that’ll come into people’s budgets in terms of how much they want to get for a monthly payment on a mortgage.”
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