The Real Estate Market in the GTA as of August 25th, 2023

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To Summarize

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In July 2023, the real estate markets in Markham and Richmond Hill showed differing trends. 

Markham's market was busy with 241 property sales and an average property price of 1,648,000. The growth trends for Markham's real estate are positive, with the past month showing a 1.73% increase, and a strong long-term growth over three years (38.93%) and five years (48.58%). 

On the other hand, Richmond Hill saw fewer sales (168) and a lower average property price (1,540,000). While it saw a small dip in prices over the past month, its long-term growth looks promising, with increases of 31.78% over three years and 44.59% over five years.

Over a ten year period, both towns have grown impressively, with Markham and Richmond Hill's markets increasing by 128.85% and 130.68% respectively. 

Properties in both areas were selling fairly quickly, typically within two weeks. However, the Sales to New Listings Ratio (SLNR) suggests that buyers might have the upper hand in negotiations as of July 2023. 

The significant rise in Canadian interest rates combined with economic instability in China might impact future trends in these markets, particularly considering the substantial Chinese communities in both areas. Therefore, investors, homebuyers and real estate professionals in these markets should keep a close eye on these economic conditions.

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Bench Mark Pricing Comparison

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Markham

The real estate market in Markham showcased a total of 241 sales in July 2023, while Richmond Hill reported fewer sales, a total of 168. This indicates that demand was relatively high in Markham compared to Richmond Hill.

The average benchmark price for dwellings in Markham is currently set at 1,648,000. The Housing Pricing Index (HPI) stands at 430.0, indicating the relative change in housing prices for the standard housing type in this municipality.

Markham’s real estate market showcased an increase of 1.73% in the past month which indicates a steady growth trend in the market. On examining the quarterly growth rate, the market topped at a percentage change of 5.11 in the past three months, suggesting a welcoming atmosphere for investors.

In terms of half-yearly statistics, the real estate market in Markham has recorded a growth of 10.91%. The yearly growth percentage was recorded at 6.12%, showing signs of a robust and stable property market.

Over more extended periods, Markham’s real estate market displayed a promising trend. The staggering growth of 38.93% over three years and 48.58% over five years indicates a promising return for long-term investors. A remarkable decade-long price growth of 128.85% underlines the formidable resilience and upcoming prospects of Markham’s housing market. 

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Richmond Hill

The municipality of Richmond Hill has a benchmark price of 1,540,000 and a Housing Pricing Index (HPI) of 406.0 as per the recent stats.

In contrast to Markham, Richmond Hill witnessed a marginal decline of 0.42% in the housing prices over the past month. However, the market rebounded strongly over the quarter with an increase of 7.07%. The half-yearly growth stands at 11.42% suggesting a steady recovery from the monthly decline.

On an annual basis, the local real estate sector experienced a modest growth of 1.86%, a slow but consistent increase indicating stability in the market. 

Taking into account the long-term growth, Richmond Hill’s real estate market shot up by 31.78% in the past three years and 44.59% across five years. Over the last decade, the market posted an impressive growth of 130.68%, reinforcing Richmond Hill as a robust and attractive market for long-term property investors.

In both municipalities, despite differences in short-term growth, the ten-year price growth showcases a healthy, viable market. Continued vigilance and study will help property investors and homeowners make most of these market trends.

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Days on market

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Markham's average List Days On Market (LDOM) in July was 15 days, indicating that properties were on the market for around two weeks before they were officially sold. Comparing this to the Year-to-Date (YTD) average of also 15 days, we don't see any changes indicating that the market has been stable since the beginning of the year.

In contrast, Richmond Hill had a slightly higher average LDOM of 16 days for July. The YTD average for Richmond Hill was slightly lower at 14 days, showing that properties in July took a bit longer to sell compared to the start of the year.

Further, the average Property Days On Market (PDOM), the time from when a property was listed to when it went under contract, for July in Markham was 20 days, while the YTD average was slightly lower at 19 days.

Richmond Hill's PDOM for the same period was higher than Markham's, clocking in at an average of 21 days in July. The YTD average was 25 days suggesting that it took a bit longer for properties to go under contract this year in Richmond Hill.

In conclusion, Markham's real estate market was quicker in terms of sales compared to Richmond Hill in July 2023. Despite this, the difference in YTD averages suggests a slower pace in Richmond Hill.

SLNR Past 3 Years to Stopping At July 2023 

Here's the visual representation of the Sales to New Listings Ratio (SLNR) from 2020 to 2023 (Statistics from TREBB) :

Key Observations

• 2020 (Green Line): This year saw fluctuations between a balanced and seller's market. The year ended with a significant surge, favoring sellers.
• 2021 (Blue Line): This year consistently favored the sellers. The SLNR remained mostly above 0.6, indicating a strong seller's market throughout the year. The latter part of the year, especially November and December, saw an even stronger seller's trend.
• 2022 (Orange Line): The year started off favoring sellers but saw a steady decline from April onwards. By mid-year, it shifted towards a buyer's market, with the SLNR dropping below 0.6. However, there was a slight recovery towards the end of the year.
• 2023 (Grey Line): Data is available only up to July. The year began with a buyer's market indication but saw a recovery around March, reverting to a balanced market. The trend, however, seems to be declining again by July.

Comparative Analysis

• 2020 to 2021 Transition: There's a clear shift from a fluctuating market in 2020 to a consistently strong seller's market in 2021.
• 2021 to 2022 Transition: After a strong seller's market in 2021, 2022 began on a similar note but saw a pronounced shift towards a buyer's market as the year progressed. This could indicate changing dynamics in the real estate market or broader economic factors at play.
• 2022 to 2023 Trend: The declining trend from 2022 seems to continue into 2023, with the first few months indicating a stronger buyer's market. However, there's a recovery towards the middle of the year, but it's still early to predict the overall trend for 2023.

The yellow-shaded area indicates the balanced market range, and it's evident that 2021 mostly stayed above this range, indicating a seller's advantage.

Focusing on July

• The SLNR for July 2023 is just under 0.4.

In the context of the Sales to New Listings Ratio (SLNR):

• A ratio below 0.4 typically indicates a buyer's market. This suggests that there were more listings available than there were buyers, which can put downward pressure on prices and often lead to longer listing durations.

Analysis

Comparison with Previous Months (2023):

• The year started with the SLNR being just below 0.4 in January, indicating a strong buyer's market.
• The ratio improved through February to May, hovering around the balanced market threshold of 0.6.
• By June, it dropped to the range between 0.4 and 0.6, signaling a transition.
• In July, the SLNR dropped to just below 0.4, indicating a stronger shift towards a buyer's market.

Comparison with Previous Years:

• In July 2020, the SLNR was exactly 0.6, indicating a balanced market.
• In July 2021, it was just under 0.8, indicating a seller's market.
• In July 2022, it was just above 0.4, showing a transition towards a buyer's market.
• The consistent decline in the SLNR for July over the years signifies a trend where buyer's power seems to be increasing year after year in this specific month.

Possible Implications:

• For Sellers: It might be harder to sell properties, and they might have to be more competitive with their pricing or offer additional incentives to attract buyers.
• For Buyers: They might have more options available, potentially better prices, and more negotiating power.
• For Real Estate Professionals: Marketing strategies might need to be adjusted. More focus might be required on marketing listings effectively, staging properties, and possibly considering price adjustments.

Potential Causes:

• Economic factors such as job losses, interest rate changes, or economic downturns are making the market less desirable for buyers.
• Seasonal factors: July could be a month where more listings are introduced into the market increasing the supply in the market while demand is dropping due to economic factors.

Economic Factors Involved

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The intertwined dynamics of global economic events and domestic financial policies can exert significant influence on local markets. The real estate market in Markham and Richmond Hill, with its substantial Chinese immigrant demographic, offers a lens to view these effects. This section delves into the implications of rising interest rates in Canada and China's economic scenario on the property market dynamics of these regions.

Steep Ascend in Canadian Interest Rates

From March 2022 to July 2023, Canada experienced a substantial rise in interest rates, with an increase of 4.5 percentage points. Such a rapid escalation in rates can have multiple effects:

• Mortgage Affordability: Higher rates mean higher mortgage costs. This can deter potential buyers, especially first-time homeowners or those with budget constraints.
• Refinancing Concerns: Homeowners with variable-rate mortgages might face higher monthly payments, leading to financial strain or even defaults.
• Investment Decisions: Real estate, often seen as an investment avenue, might seem less attractive due to increased borrowing costs.

China's Economic Landscape

Recent reports highlight China grappling with deflationary pressures, a phenomenon often linked with decreased consumer and business confidence. Key indicators from the article include:

• Economic Deterioration: Beijing's economic metrics in recent months have not met expectations, with significant concerns like soaring youth unemployment figures.
• Real Estate Challenges: China's real estate sector, a pivotal component of its economy, is facing pronounced stress. Major firms, such as Country Garden, are on the brink of default, while others like the Evergrande Group have sought bankruptcy protection.
• Deflationary Impacts: China registered a deflation for the first time in over two years in July. Deflation can discourage consumer spending as they expect prices to decline further, potentially leading to reduced production, layoffs, and broader economic contraction.

Implications for Markham & Richmond Hill

The real estate market in areas with pronounced immigrant populations can be influenced by economic conditions in their home countries. Given the significant Chinese community in Markham & Richmond Hill:

• Investment Caution: Chinese investors, amidst uncertainties in their native country, might adopt a more conservative stance, potentially leading to reduced investments in the local real estate.
• Shift in Sentiments: Economic challenges in China can sway the financial sentiments of Chinese immigrants locally, influencing their property investment decisions.
• Liquidity Dynamics: If liquidity or financial stability concerns arise in China, individuals might either look to liquidate Canadian assets to remit funds back home or hold off on new investments.

In summary, the combination of Canada's rising interest rates and China's economic challenges suggests potential downward pressures on the real estate market in Markham & Richmond Hill. Stakeholders are advised to monitor these global and local trends closely and strategize accordingly.

Conclusion

In conclusion, Markham and Richmond Hill's real estate markets in July 2023 bore witness to significant growth and maintained encouraging prospects for investors, despite exhibiting some short-term fluctuations. A review of long-term trends showcases a strong, upward pattern, painting both markets as potentially lucrative investment avenues. However, properties in Richmond Hill displayed a marginally slower sale pace compared to Markham. The Sales to New Listings Ratio indicates the possibility of a shift towards a buyer's market, creating a critical checkpoint for investors and real estate professionals to reconsider their strategies. On an external level, Canada's rising interest rates, coupled with China's economic state, also hold potential implications for both markets, given the substantial Chinese communities in Markham and Richmond Hill. Thus, these local and global economic conditions warrant careful monitoring by all stakeholders to appropriately strategize and navigate the property investment landscape.

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