These five cities have seen home prices fall by almost 30% — nearly double Toronto’s drop

Some Ontario cities’ home prices have declined by almost a staggering 30 per cent, nearly double Toronto’s price drop since the February 2022 peak, according to a report from Desjardins.

While the focus is often on GTA real estate, as nearly half of home sales for the province happen in the region, some surrounding cities in the province saw greater home price increases from December 2019 to the February 2022 price peak. And therefore, greater price drops from February 2022 until now, said the report released on Monday.

“Home prices rose significantly in the GTA, but not nearly as much as they did in smaller Ontario communities or nationally for that matter,” the report said. “And these places are expected to continue seeing the biggest correction.”

Price increases in Ontario during the pandemic were most pronounced within a few hundred kilometres of the GTA, the report said.

Despite the price declines, home prices are still high compared to pre-pandemic levels, and interest rates remain elevated, eroding affordability not just in Toronto but across the province.

Leading up to the February 2022 peak, in the pandemic, more people from the GTA wanted to move to bigger homes with greater access to the outdoors. This pushed up home prices significantly in areas that typically didn’t see large volumes of activity.

That’s why prices in Windsor increased by 98 per cent, Oshawa prices increased by 87 per cent, London prices increased by almost 80 per cent, Hamilton increased by almost 75 per cent and St. Catharines increased by 77 per cent. Toronto prices increased by 47 per cent, according to the report.

But after the peak, prices in Windsor dropped by almost 26 per cent, Oshawa prices dropped by 26.5 per cent, London saw an almost 27 per cent drop, Hamilton dropped by 25 per cent, and St. Catharines saw an almost 30 per cent drop. In Toronto, the price drop was 17 per cent.

New Toronto real estate board data released last week reinforces this trend. It showed that average home prices in King, Ont., fell by $1 million from the market peak last year, from $3.2 million to $2.1 million.

“Cities that saw the largest prices gains would also be the ones to see the biggest price corrections,” said Randall Bartlett, senior director of Canadian economics at Desjardins and report author. “But what’s surprising is how resilient some markets have been.”

For example, even though St. Catharines home prices have fallen a staggering 30 per cent, it’s still 47 per cent above pre-pandemic levels.

“People are still working in a hybrid fashion or even entirely remote as there’s reluctance to come back into the office, especially for people who moved far away outside of Toronto,” he said.

A result of drastic home prices increases, interest rate hikes, and soaring rents, has lead to an affordability crisis in Ontario’s cities.

While affordability has long been an issue in the GTA, the report shows that other Ontario cities are suffering, Bartlett said.

“Cities are being hit with all of these cross currents right now,” he said. “We also saw an exodus of people leave Toronto bringing their wealth with them to other cities like Windsor, which pushed the prices up in that region making it challenging for the local residents.”

The shifting dynamics of the province — as Toronto residents move to smaller Ontario cities — has added affordability pressures across many cities in the province. There is also the influx of new immigrants, adding further constraints to the housing supply.

“We simply don’t have enough housing for people in Ontario, and all three levels of government really need to step up and address housing affordability,” Barlett said.

While Toronto remains the most unaffordable city in the province, it’s followed closely by St. Catharines, Hamilton and Kitchener. Cities somewhat further afield, such as London, Windsor, Kingston and Oshawa, have seen affordability decline more modestly, the report said.

At the same time, Ottawa, Sudbury and Thunder Bay, have seen affordability hold up better but still declined since the final quarter of 2019.

Because Ontario’s economy relies heavily on real estate, the province has been hit the hardest by interest rates compared to other provinces. From December 2019 to February 2022, prices rose by 60 per cent, and after the peak prices dropped by more than 21 per cent.

“Demand is high and will keep rising in the province both for the rental market and for those looking to buy,” Barlett said. “As home prices go higher the market becomes unattainable for newcomers and younger folks in Ontario. If the government wants to be serious about helping we need to put all our resources into increasing density in our cities, which significantly lag behind other major cities globally.”

Clarification - March 6, 2023 - This story has been updated.

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