What do I think about the Toronto real estate market?
Here are my top 3 predictions.
Prediction #1 Out of the Bottom
We’ll start with detached homes and we’ll take a look at both the sales volume and average price.
Sales volume peaked in March 2022.
Then the rate hikes struck the market.
At the end of 2022, sales volume was down more than 70% from the peak.
During the first 5 months of 2023, the market was active again thinking that the Bank of Canada was pretty much done with the rate hikes.
Sales volume had actually recovered significantly and was only less than 20% down from the peak.
Then came the surprise rate hike in June, followed by one more rate hike in July.
Once again, sales volume returned to the bottom again.
Both the 416 and 905 areas followed pretty much the same trend, but the volume in 905 was much higher simply because there are a lot more detached homes in the 905 area.
What about the average price then?
Prices peaked in February 2022 with the 416 area surpassing the $2 million dollar mark.
Similar to the sales volume, prices bottomed at the start of 2023 and significantly recovered during the first 5 months of the year.
At that point, the average price in the 416 area was actually only 7.8% down from the peak.
Then of course the rate hikes hit again.
What’s interesting was that prices were actually holding on this time, with the average price of 416 still above $1.6 million and 905 still above $1.35 million.
Strong recovery during the first half of 2023 and prices holding on at the end of year, these 2 things are telling us that the market is very resilient.
With the wide expectation that we are going to see rate cuts in 2024, some are predicting as early as March or April, I think the recovery curve for 2024 will look similar to what we saw during the first half of 2023.
But we will probably have to wait for the first rate cut announcement to kick start the recovery.
Now, let’s take a look at the condo market.
The sales volume looks very similar to the detached market.
Peak to bottom, big recovery, then back to the bottom again.
This time, the 416 volume was much bigger than 905 because there are a lot more condos in the City of Toronto.
What about the average price?
The trend is also similar to the detached market.
But unlike the detached market, prices continued to trend down at the end of the year.
When we compare the year end price to the peak, it’s a 15% drop in 416 and an 18% drop in 905.
In the detached market, it’s a 22% drop year end vs peak in both the 416 and 905 areas.
If you compare the percentage drop, then the condo market may still face more downward pressure.
Given that prices have stabilized in the detached market, it will likely lead the way to recovery.
Once that happens, the price gap between low rise and high rise will be widened.
And more people will return to the condo market because of the price and eventually leading to a recovery in the condo market as well.
This has always been the trend in history, a recovery in the low rise market will drive a recovery in the high rise market as well.
So I think 2024 will be about market recovery but when and how fast the recovery is going to happen will be highly dependent on the rate cuts.
Prediction #2 The Year of End Users
I would expect the majority of investor buyers to continue to hibernate in 2024.
It will be the year of end users because they have the real need for a place to live, they know the rate cuts are coming and they want to get into the market before the recovery begins.
For just the first 10 days into the new year, we have already sold a 1 bedroom unit in downtown Toronto, 1 offer in negotiation for a very old 1 bedroom unit in downtown Toronto and another one for a 1 bedroom assignment in Newmarket, all with end users.
I can feel that the momentum from end users is coming.
Of course, end users will be looking into the resale market.
So the resale market will be leading the way to market recovery and the pre-construction market will continue to remain quiet.
From a business point of view, I’m putting in resources to expand my resale team this year because that’s where I see the growth.
For investor sellers, if you can keep the property, I do encourage you to keep it because the long term outlook for the Toronto market is still very strong.
But if you do need to offload because you are carrying a big mortgage payment and your rent is way below market because of rent control, then this year can be a good chance to sell the unit to an end user.
If you need help with that, you can schedule a call with me at the link below.
Prediction #3 Landlord Market Continues
We started the year with news headlines saying “Record number of condos to flood Toronto market in 2023”.
Indeed, 2023 was a record year for condo completions in the GTA.
But we kept getting headlines month after month saying GTA rents hit yet another record high.
The average rent for a 1 bedroom unit in Toronto now sits at around $2,600.
This really tells you how strong the rental demand is.
December is typically a very slow month for rental because of the Christmas and new year holidays.
But this past December, the rental market was surprisingly busy.
We leased 31 units.
The same period last year, the year end of 2022, we only leased 14 units.
With this winter momentum, I think we will continue to see a landlord’s market in 2024 because immigration is not slowing down.
Yes, rent is already very high, but I think we will see new record highs again, maybe another 5% up.
So those are my 3 predictions, I will of course keep you posted on how things evolve throughout the year.
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