Toronto's Spring Market is Heating Up

What’s Happening in the Market?

Toronto's spring market is in full swing! In April, we saw a huge jump in home and condo listings—up 47.2% from last year! And guess what? This trend is expected to keep going in May.

With more homes and condos on the market, things are starting to balance out. In some areas, especially with condos, it’s starting to look like a buyer’s market. That means more choices for you and potentially better deals. Even though fewer homes sold in April compared to last year, lots of people are still super interested in buying. Tons of property showings are being booked, which means buyers are just waiting for the perfect moment or the right property to jump on.

Year-Over-Year Summary-April 2024

What Buyers Are Thinking

Buyers are taking their time these days. With interest rates staying steady, there’s no rush to make quick decisions. Many people are waiting to see if real estate prices will drop further. But so far, prices have mostly stayed the same or even gone up a bit. Some homes have been sitting on the market for a while, but the really good ones—like those in great locations, move-in-ready, or with special features—are still selling fast, sometimes even with multiple offers. It looks like buyers are getting ready for potential interest rate cuts in the future.

GTA MLS® NEW LISTINGS

Source: Toronto Regional Real Estate Board

Luxury Homes Are Still Hot

The luxury real estate market, especially for homes priced between $3 million and $5 million, is still going strong. These buyers don’t seem to be worried about interest rates at all.

Condos and New Builds

If you’re into condos, there’s a lot more to choose from right now. The number of resale condos on the market has jumped by 66%, even though demand hasn’t quite kept up. Still, condo sales are up a bit, and prices haven’t dropped much. Most of the action is for condos priced under $900,000, with regular buyers leading the charge. Investors are also eyeing the market, knowing that real estate is a safe bet against inflation.

On the new construction front, things have slowed way down. Developers have hit pause in the first part of 2024, which is a big change from the government’s push for more affordable housing. New condo sales have dipped, and there are over 23,000 unsold units. However, once interest rates go down, builders think these will sell quickly. Investors believe that less construction now will mean higher prices in the future. By 2028, we might only see about 5,000 new units hitting the market, which could push values even higher than before.

Condo Completions and Scheduled Occupancies-GTA-2024

Source: Urbanation

So, if you’re looking to buy, now might be a good time to explore your options and see what’s out there. Happy house hunting!

Toronto's Real Estate Market Set to Flourish this Spring after Years of Uncertainty

The mood and emotions that best describe buyers and sellers within the Toronto Real Estate market in February is…“Impatience.”

Toronto Market Insights

In February, Toronto home sales saw a yearly increase of 17.9% and a monthly surge of 32%. Additionally, new listings rose by 37% compared to last month and by 33.5% compared to the same period last year. After over a year of uncertainty due to rate increases, buyers who were on the sidelines have adjusted their expectations for the type of property they can afford to purchase. This is a clear indication that many buyers are beginning their search, as there is only so long we can keep the real estate market on pause.

Real Estate Current Trends

The anticipation of mortgage rates decreasing is building confidence and has led many buyers to start educating themselves on the real estate market. Spring is in the air as more homes listed for sale are quickly receiving multiple offers, especially in the more affordable outlying neighborhoods surrounding Toronto. Buyers are keeping their options open and, if need be, driving until they qualify.

Not surprisingly, many sellers have not rushed to list their properties for sale, as they expect, and hope that lower rates will bring them higher prices. This is a classic recipe for demand outstripping supply, and prices are expected to rise in the coming months. We're finding that the most active sellers are those with rates that don't mature for another year or two. This may be the best opportunity to move up by porting and blending their mortgage, resulting in a new rate lower than current interest rates. Furthermore, these move-up buyers are being stress-tested at a much lower rate. The Toronto market is exhibiting many opportunities for move-up buyers and renters who have taken the time to save for a larger down payment over the past year.

Toronto's Shifting Preferences

The current area of interest is townhomes, semi-detached, and lower-priced freehold homes. These property types are receiving the most attention and, in most cases, multiple offers. Sales have notably increased across various segments, with detached homes up by 21%, semi-detached by 11.5%, and townhouses by 24.8%. As prices for these properties, particularly semi-detached homes which have seen the most significant price increase at 5%, start to rise, this will be the turning point, and buyers will be forced to consider the next most affordable real estate... condos.

Ontario Bank of Canada Rates 2024 February

Condo Developments

While the construction of new condo developments has been paused due to higher rates, many condos have been built and are coming to the market this year. The February assignment market continued to be very active as a result of investors who haven't been able to close due to the increased rates. However, many builders are being creative by providing incentives as well as being prepared to take units back and wait until the market picks up. We'll be looking in the months ahead to see how many will be added to the desperately needed rental pool and how many will simply be placed on the market to be sold. Everyone should be concerned with the future supply being nonexistent due to the delay in new condo starts in 2024. Because of this and contrary to government initiatives, the future supply will simply not be enough to satisfy the pent-up demand and the increasing immigration to our city.

2024 Condo Real Estate Market Outlook

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.

Toronto New Condo Market Update

If you've been keeping an eye on the Toronto condo market lately, you might have noticed some changes. Don't worry; we're here to break it down for you in simple terms, whether you're a potential buyer or just curious about what's happening. Let's dive into the latest updates!

Condo Sales Slowdown in Q3-2023

In the third quarter, Toronto’s new condo market experienced a more significant slowdown than what we typically see. This was partly due to caution among both buyers and developers. The Bank of Canada had raised interest rates to a 22-year high, making everyone a bit hesitant. While condo sales did go up by 41% in Q3 compared to the previous year when interest rates were rising rapidly, the number of presale condos was the second lowest it's been in the past 20 years for this time of the year.

Distribution of Toronto Condo resale transactions

Limited New Condo Launches

During the summer, there weren't many new condo projects launched. Only 2,491 units were brought to the market as presales in the last quarter, which marked a 23% decrease compared to the previous year and was 41% below the latest 10-year Q3 average. Half of these launches occurred in September, following a pause in rate increases by the Bank of Canada. The momentum continued into October with 6,916 units launched so far in the fourth quarter, surpassing last year's 4,859 launches.

Condo Supply V.S. Demand

While the supply of new condos is improving, the rate at which they're being bought (absorption rate) remains below normal. This situation makes it challenging for developers to keep launching new projects. In Q3, only 42% of the units brought to the market were sold by the end of the period, slightly higher than the latest four-quarter average but significantly lower than levels seen before the interest rate hikes.

905 V.S. 416

When we examine condo sales in the GTA for this year, we notice that the majority (57%) of them were in the 905-Region. In that area, condos were sold at an average price of $1,161 per square foot. On the other hand, in the City of Toronto, new condo launches had a higher average price of $1,383 per square foot. The rate at which condos were bought (absorption rate) was 61% in the 905 region and 43% in the City of Toronto. The price range between $1,100 and $1,199 per square foot had the most condo sales in both areas this year.

Price Adjustments

As more people look for condos they can afford, there's a growing gap between the asking prices for unsold units and the selling prices for new units. In the third quarter of 2023, the average sold price for new launches reached its lowest point in two years, at $1,216 psf. This was a significant drop of 18% from the highest prices seen in the same quarter in 2022. However, asking prices for remaining inventory decreased only by an average of 2.5% over the past year. Most new condos, about 86%, were presold by the third quarter for 2023. This made it hard for sellers to lower their prices due to high development costs.

Resale Market Challenges

In the resale market, condo prices kept going down during Q3-2023, and they dropped by 2.8% compared to the previous quarter. If we look back to the highest prices in Q1-2022, condo prices were down by 11%. As interest rates rose, there has been a shift in the distribution of condominium resales, with fewer condos selling for over $1,000 psf.

The Future of Condo Construction

Looking ahead in the medium-to-long term, the slowdown in new condo sales is expected to have an impact on the beginning of new construction projects. We've already seen a significant decrease in the number of new condos that have started construction. This trend is likely to continue in the next few quarters, which will affect the availability of new condos.

The Toronto condo real estate market has been experiencing some shifts due to rising interest rates and changing buyer preferences. If you're thinking about entering the market, it's essential to stay informed about these trends and seek guidance from experts to make informed decisions. The market may be evolving, but with the right knowledge, you can navigate it successfully.

Toronto One-Bedroom Condos See Largest Decrease in Price

According to the latest Toronto Regional Real Estate Board (TRREB) report, the largest decrease in value in downtown Toronto over the past year was seen in one-bedroom condos. Prices for these condo units dropped significantly with a staggering $100,000 decrease - a trend not seen in larger units.

When Covid hit, people started moving out of downtown Toronto to the suburbs and beyond. This is especially true for tenants and those living in smaller units, who were the first to leave. Subsequently, owners and investors of smaller units also decided to sell, leading to an oversupply of one-bedroom condos for sale. This ultimately contributed to market saturation, which meant prices inevitably declined.

However, as people start returning to the city and rents begin to rise, we are starting to notice an increase in demand for fixer-upper units. Buyers who previously only wanted move-in ready condos, are now willing to buy and renovate those smaller units in need of repair due to a lack of listings.

In February, new listings were down 41%, which has contributed to prices stabilizing at their current lower value. It remains to be seen whether owners will be forced to sell or whether potential buyers will increase demand. What we do know is that the Toronto market has already begun bouncing back. The farther outside Toronto, the longer it will take to begin bouncing back.

TORONTO AVERAGE PRICE

Monthly with 3 Previous Years for Comparison

What Will Toronto's Real Estate Market Look Like in 2023?

Toronto's Real Estate Market in 2022 was a rocky journey. The Bank of Canada's late correction to deal with inflation by raising interest rates caused a market correction that many could not foresee. Sales and prices dropped to levels we haven't seen since 2008! So what will Toronto's real estate market forecast look like for 2023? We asked economist and Broker of Record, Jamie Johnson of RE/MAX Condos Plus in Toronto his top predictions for the new year.

A Balanced Market

Don't expect real estate prices to fall much further. Toronto is finally in a balanced market and we hope it stays that way. The only way you would see further (significant) price drops are if Ontario experiences an influx of Power or Sale properties on MLS. That's where mortgage lenders force borrowers in default to sell. Mortgage arrears are a lead indicator for 'power of sale' listings. More Power of Sale listings equals lower prices. Only 0.06% of mortgages in Ontario are in arrears. In comparison, the U.S. in 2008 was 7%.

Real Estate Sales

The number of Real Estate sales is always a lead indicator for price increases. 2022 had the lowest sales numbers in 10 years! In 2022 sales reported by the Toronto Regional Real Estate Board (TRREB) were 76,000. Down from 121,000 in 2021. The key indicator for what the market will look like for the remainder of the year will be determined by the sales numbers of March of this year

Mortgage Rates

Mortgage rates were a huge topic of discussion in 2022. This year, look for mortgage rates to stabilize (Phew) and then trend lower in the latter half of the year. The Bank of Canada will be forced to modify its position to deal with the rising unemployment numbers. The more severe the recession in 2023, the more interest rates will fall.

New Construction

New Condo buildings coming onto the market in 2023 will be more expensive than the current resale condo market. Unfortunately, affordable housing is still years away as everyone is still debating on the best way to make it a reality.

Immigration

Immigration will most likely have a huge impact on the Toronto real estate market. Expect immigration to increase to 450,000 plus this year. And most likely Toronto will feel the effects the most. This will put additional pressure on both the rental and sale markets.

Recession

There is no denying that we are heading into a recession. Some will say we're already there! While employment numbers still remain high, a look at the yield curve shows the severity ahead. A yield curve compares interest rates over various terms. In a normal market, long-term rates are higher than short-term rates. When it's reversed, that's a strong indicator that a recession is imminent.