What You Need to Know
As we step into the year 2024, the condo real estate market is poised for a unique journey with two distinct phases. We break down the key factors shaping the market's trajectory and provide insights for both buyers and sellers.
1. Market Overview
The year 2024 is expected to unfold in two halves. In the initial phase, prices may experience a slight decline of around 2-3%. However, it's important to note that not all potential buyers will rush back into the market when mortgage rates start to decrease. Some may opt to wait for further rate reductions.
2. Mortgage Rates
Currently, five-year fixed-rate mortgages are hovering around 5.6%. By the end of 2024, experts anticipate these rates to settle at approximately 4.5%. Similarly, variable rate mortgages, currently at 7%, are projected to drop to 4.25%, providing favorable conditions for potential buyers.
3. Economic Climate
The unemployment rate in Canada has risen to 5.8% in 2024, up from 4.5% in 2022, indicating that the economy is heading toward a recession. One way to gauge this shift is by observing the yield curve, which has changed noticeably from year-end 2022 to the current one.
4. Population Growth
A significant driver of the housing market is the continued population growth of approximately one million people annually, including immigrants, refugees, and international students. Half of these newcomers are choosing Ontario as their destination, further increasing the demand for housing.
5. Housing Completions
While housing completions are averaging around 220,000 units per year, it's important to note that Ontario contributes only 35% to this total. This discrepancy highlights the need for increased housing development in the province.
6. Supply and Listings
Despite concerns about a housing shortage, it's unlikely that there will be a surplus of listings from sellers to address this issue. In Ontario, the number of mortgage arrears (over 3 months) has increased slightly, but it represents only 2200 houses in total, which is not sufficient to significantly impact the market.
7. Affordable Housing
While there is often talk about "affordable housing," it's important to approach this concept with caution in 2024. Governments tend to make promises they struggle to fulfill, as seen with projects like the Eglinton LRT Crosstown. Achieving true affordability may require governments to purchase housing at market prices and offer them for rent or sale at a 50% discount, funded through government deficits.
In conclusion, the 2024 condo real estate market promises an interesting year with shifting dynamics. While buyers may find opportunities with lower mortgage rates, the overall market conditions will be influenced by economic factors, population growth, and the availability of affordable housing. Stay informed and make wise decisions as you navigate the evolving condo real estate landscape in the coming year.