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New Trend in Toronto Housing Market 2024

This past week, the Toronto Real Estate Board released the February statistics and the Bank of Canada announced its interest rate decision for March.

When you put the 2 things together, you would be able to explain this new emerging trend observed in the current marketplace.

I’m going to give you lots of exclusive market insights today, give me a like if you enjoy them, subscribe if you haven’t done so!

For the fifth consecutive time, the Bank of Canada decided to hold its key policy rate at 5%.

While it is disappointing, this rate hold decision is of no surprise at all.

The Bank still thinks it is too early to start cutting rates, they need to make sure inflation is under control, so on and so forth.

It has been 2 full years since the Bank of Canada started the first rate hike in March 2022.

Whenever the government introduces a new policy, it takes the market roughly 1.5 to 2 years to accept and adapt to the change.

Just like how the Non-Resident Speculation Tax shocked and crashed the housing market from 2017 to 2019.

By now, most people have accepted that interest rates will remain high for a while.

At the same time, they also believe that we have hit the peak interest rates.

Rate cuts will be coming this year but it is hard to say when.

When the interest rate was ultra low, people would be looking to maximize their leverage because borrowed money was cheap.

But with the current environment, people are looking for something totally different.

Their priorities are certainty and stability.

Nowadays, fixed rate mortgage products are much more popular than variable rate products.

With an aggressive thinking model, you would bet on a rate cut and use the lower rate to calculate the maximum value of a property you can afford.

But with certainty and stability in mind, you would use the current peak mortgage rates to calculate what you can afford comfortably, even if rates continue to stay high.

And this could mean buying a smaller and cheaper home that you initially envisioned a year or two ago.

This is exactly what’s happening in the housing market right now and is reflected in the latest statistics.

I’m going to give you an overall picture first, then we’ll deep dive into the numbers to see the trend.

Remember we saw very strong market recovery in the first half of 2023, if we compare February this year to last year, sales are actually up 18%.

In terms of the average price, it is roughly 1% above last February.

I think there’s not much debate that the market is recovering despite the high interest rates.

Let me show you something interesting.

We’ll zoom into the 416 area and compare the average prices in the first 2 months of this year.

For detached houses, prices are up 5% in February.

Semi detached, up 9%.

Townhouses, up almost 8%.

Condos, up 2%.

What’s wrong with the semi detached and townhouse segments?

Prices are up 8 to 9% in a month, that’s pretty scary.

You will see why when I show you the sales activities in the first 2 months of this year compared to that of last year.

Sales activities are up almost 14% for detached houses.

Semi-detached, up 26%, almost double that of detached houses.

Townhouses, up 27%.

Condos, up 22%.

You see, semi-detached and townhouses are gaining popularity.

When things become popular, prices go up.

People are eager to get into the current market because prices are still relatively low, but they are making changes to their decisions to adapt to the high interest rates.

So instead of a detached house, they would go for a semi or townhouse instead.

In the 416 area, a semi is typically around 20% cheaper than a detached house.

And a townhouse is around 40% cheaper than a detached house.

That’s why semi and townhouses have become so popular.

It is obvious that people would rather get into the market faster by buying smaller and cheaper, rather than waiting on the sidelines.

Condos are actually very popular too, with a 22% increase in sales activity.

But we are not seeing a price hike yet because there is a lot of inventory in the market.

Last week, we talked about 2024 being a year of record completions in condos, with almost 27,000 units scheduled for occupancy in the GTA.

Eventually, when semi and townhouses get more and more expensive, condos will become more and more popular, it is the price gap effect that I always talk about.

What about the 905 area?

Are things different in the suburbs?

In terms of the average price, detached houses are up 6%.

Semis, up 3%.

Townhouses, up almost 4%.

Condos, up almost 2%.

Detached houses actually saw the biggest price increase in the suburbs.

And I think there are 2 reasons why.

One, prices are significantly cheaper in the 905 compared to 416.

With the same amount of money, you can buy an average detached house in the 905, but only a semi-detached house in the 416.

The second reason is, the 905 area experienced a bigger drop than the 416, especially for big houses over 5,000 square feet.

So detached houses in the 905 are attractive because they look like a good deal.

Here’s the thing.

We all know the market is recovering and prices are trending up.

But I hope this video gives you a deeper understanding of the market dynamics that are happening underneath.

People are shifting their mindsets , they prioritize certainty and stability.

They have accepted the high interest rates and want to get into the market now with what they can afford.

A rate cut will definitely add more fuel to the housing market, but the timing of when it actually happens has become less important, especially for end users because they are already working around it.

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