Introduction
Welcome to October, and with it, the start of the final quarter of 2023. As we navigate through the twists and turns of Toronto's real estate landscape, it's crucial to understand the current market conditions and what's on the horizon. In this blog post, we'll dive into the four major market segments: assignment, resale, pre-construction, and rentals, to give you a comprehensive overview of what to expect.
#1 The Assignment Market
The assignment market is currently one of the most challenging segments. High occupancy fees, driven by soaring interest rates, and delays in inspections and documentation are making it a tough market for both assignors and potential buyers. Assignors aim to avoid these high costs, but competition with resale units poses an additional hurdle.
Who's willing to buy assignments in this climate? There are two primary types of potential buyers: end-users who prefer brand-new units and cash-rich investors who can put more cash down and take out smaller mortgages. However, there must be a compelling price incentive to attract investors. Most assignments that are successfully sold are typically priced at their original values from a few years ago.
The key takeaway here is that if you're looking to sell by assignment, be prepared for the reality that the price may not meet your expectations. Your first option should be to retain the unit and consider seeking mortgage assistance to weather the high-interest rate storm.
#2 The Resale Market
The September market in Toronto is traditionally a hot one. However, this year, it took a surprising turn and became ice-cold, with sales activity down by 12.3% compared to August. What's intriguing, though, is the price dynamics. In the 905 area, average prices slightly trended lower, with detached houses experiencing a 1.35% dip, townhouses inching up by 0.02%, and condos declining by 0.85%. In contrast, the 416 area saw an increase in average prices, particularly for detached homes, with a 5.43% jump.
How can prices rise when buyer interest is low? The explanation lies in the smaller pool of active buyers, combined with a wider selection of properties. Buyers have become highly selective, favoring well-maintained, nicely staged, and well-photographed properties. In today's market, quality matters more than ever.
For sellers, the top 10% to 20% of great properties remain resilient, while the remaining 80% face challenges due to the lack of buyers. Therefore, it's essential to ensure your property falls within that top tier or offer an attractive price incentive.
#3 The Pre-Construction Market
Those investing in pre-construction properties today typically believe in the long-term outlook of the market and wish to avoid high mortgage rates. However, the buyer pool is small due to widespread uncertainty. The success of new projects launching for sale depends on location and developer incentives. A reputable developer is a must-have.
#4 The Rental Market
The rental market has been fiercely competitive with high rents throughout the year, especially during the summer. As we enter October, the market is slowing down, with December being the quietest period. If you have a vacant unit, consider reducing rent by $100 to lease it before the end of November. The rental market is expected to remain robust in 2024.
Conclusion
Navigating the Toronto real estate market in October 2023 requires a nuanced understanding of each market segment. While challenges exist, opportunities do too, especially for those who are well-prepared and strategically positioned. For more market insights, subscribe and hit the bell to stay up-to-date with the latest developments that you won't find anywhere else. If you found this update informative, don't forget to like and share it with others who are interested in the Toronto real estate landscape.