It is estimated that nearly half of Canada’s population resides in Ontario. Many individuals flow into the province, especially into the Greater Toronto Area (GTA), whether for employment opportunities or newcomers to Canada seeking their cultural communities. This has led to a robust Ontario real estate market, with skyrocketing demand and lacklustre supply. Is it any wonder why the average price for a residential property here was selling for north of $1 million at the height of the pandemic-era boom? From the urban centres such as Toronto, Hamilton and Ottawa, to smaller markets like Guelph, Sudbury and Peterborough, Ontario has plenty to discover – as the old car license plates touted.
But it seems that more households are waving goodbye to Canada’s most populous province in search of more affordable locations. With more young professionals enjoying the ability to work from home, and pent-up savings from the COVID-19 public health crisis, which saw people staying home more and spending less, many Canadians are learning that there is life outside of Ontario.
Ontario Residents Moving Out of Province
According to a July 2022 survey from LowestRates.ca, seven per cent of Ontarians say they plan to move out of the province within the next year, up from four per cent just two years ago.
But what are some of the reasons? The survey discovered several trends:
- 32 per cent plan to relocate to afford a home.
- 22 per cent plan to move for lifestyle decisions.
- 17 per cent plan to move so they can buy a larger home.
- 8 per cent want to move to downsize.
Surprisingly, just three per cent report that they are planning to flee the province for employment opportunities.
“With many workers back in the office, people are thinking more rationally about their needs,” said Leah Zlatkin, a mortgage broker and expert at LowestRates.ca, in the report. “Excess space might not be as high of a priority, particularly if they are more comfortable with downsizing to a home that can accommodate a moderate lifestyle without breaking the bank.”
Meanwhile, half of Ontarians who moved in the last two years did so to buy a larger home (30 per cent) or afford a residential property (20 per cent). But the fact that a growing number are relocating is not surprising.
In the first year of the coronavirus pandemic, there was plenty of talk about an “urban exodus,” families ditching the big cities and asphalt jungles.
In addition, data from Statistics Canada highlighted that the province experienced the largest number of residents moving to other regions in more than three decades. The numbers showed that Ontario lost more than 37,000 residents in the second quarter, totalling a net loss of close to 12,000 residents.
Despite the housing industry going through a notable correction, the Ontario real estate market is still quite expensive, recent data show.
A Snapshot of the Ontario Real Estate Market
The average price of a residential property sold in September was $836,300, down 5.7 per cent from the same time a year ago, according to the Ontario Real Estate Association (OREA). Moreover, in the first nine months of 2022, the average selling price for homes sold across the entire province surged by nearly 11 per cent to $952,545.
By comparison, the average price for a home sold in the Canadian real estate market was $640,479 in September, down 6.6 per cent year-over-year.
Meanwhile, residential sales activity tumbled at an annualized pace of 37.7 per cent, totalling 12,968 units. Year-to-date, residential property sales surpassed 152,000 units, down close to 30 per cent from the first nine months of 2021.
Supply has been a notable factor in the Ontario housing market, with the number of new residential listings falling by 1.9 per cent to 28,040 new units. This was the lowest reading for this time of the year in more than a decade. Moreover, active residential listings spiked more than 78 per cent to 39,097 units. On a historical basis, new listings were 11.9 per cent below the five-year average, while active listings were within the five-year average.
Months of inventory, the number of months it would take to exhaust current stockpiles at the present rate of sales activity, totalled three, up from just 1.1 months in September 2021.
Will Mortgage Rates Fuel the Correction?
As the Bank of Canada (BoC) continues to raise interest rates, the cost of fixed-rate mortgages keeps climbing. Today, it is around five per cent – and growing. Since the central bank does not intend to slow down rate hikes until inflation has been completely reined in, borrowing costs are expected to rise even further.
And this could be disastrous for the Canadian real estate market, according to the Bank of Montreal (BMO). The financial institution anticipates that mortgage pre-approvals are propping up the housing market, adding that today’s home sales do not accurately reflect current mortgage rates. As a result, a “shock” could arrive in the coming months.
“At this precise moment, it’s a bit of a unique situation where many potential buyers have pre-approvals in hand from before the big wave of BoC tightening while also looking at 10- to 20-per-cent discounts on home prices,” stated Robert Kavcic, a senior economist at the bank, in a note. “If you can buy at a discount with a mortgage rate that no longer exists, it could be enticing.”