THE ROUGH DRAFT - FEB 6, 2024

Toronto Housing Market's "Roaring Back to Life"

January 2024 numbers are in and home sales were up 37% compared to the same time last year while new listings increased by 6.1%, according to the Toronto Regional Real Estate Board (TRREB). Sales increased for all property types with condos seeing a 41% jump from January 2023. Average sale price in January 2024 was $1.02 Million which is slightly below January 2023's $1.03 Million. With Sales-to-New Listing ratio currently sitting at 50%, it means that we're in a Balanced market.

It's important to note that Toronto's real estate market simply takes a "pause" as opposed to making an "exodus" when things seem to slow down. And 2023 was a healthy pause. People simply don't like to transact during uncertain times and last year was all about "uncertainty" both on a local and global level. Earlier in January, we conducted a quick online poll to gauge the market sentiment for 2024 and 75% of the respondents anticipated an increase in sales this year. While no one thought bidding wars would be back, we tend to believe that it is simply unavoidable esp. in the second and third quarter of this year as the pent-up demand grows stronger. And with condos being the entry point for many first time buyers, keep an eye out for a healthy comeback for this market segment.

House Prices Rose the Most in these 5 Canadian Hotspots in 2023

In a housing market dominated by high interest rates and slowing sales, home prices remained stubbornly elevated across the majority of Canada as the curtain fell on 2023. The most recent data released by the Canadian Real Estate Association (CREA) revealed that, between December 2022 and December 2023, benchmark home prices in 42 out of the 56 housing markets tracked by the group gained ground. Here are the five that ended 2023 with the biggest increases:

1- Mauricie, QC: Benchmark home price: $264,400 Change: +17.3%

2- Sudbury, ON: Benchmark home price: $437,900 Change: +15.1%

3- Greater Moncton, NB: Benchmark home price: $350,700 Change: +12.6%

4- Bancroft, ON: Benchmark home price: $551,900 Change: +12.5%

5- Calgary, AB: Benchmark home price: $568,000 Change: +10.5%

So what caused these markets to thrive in spite of all the headwinds that dominated the housing market in 2023? Well, in our view, with affordability being one of the key challenges for Canadians, these cities offered lower benchmark prices than the national average in some cases, a slowdown in new construction projects leading to existing homes becoming more attractive, and net positive migration in cities like Calgary. The trend may continue into 2024 as some of these cities are providing better affordability than the much larger metro areas like Toronto & Vancouver. For instance, our Sotheby's colleagues in cities like Halifax are already sharing insight on an active 2024 start to the real estate market in that region.

Ottawa to Extend Foreign Buyer's Ban Until January 1, 2027

A federal ban on foreign homeownership that was set to expire at the end of 2024 has been extended by two additional years -- The Department of Finance announced the extension on Sunday Feb 4. The ban will now be in effect until January 1, 2027. It bans foreign nationals and commercial enterprises from buying residential property in Canada, with exceptions for some international students, refugee claimants and temporary workers. There are also further exemptions to the home buying rules that allow for the purchase of buildings with four or more residences, or in some less populated areas.

While this ban does limit one type of a buyer from owning a residential property in Canada and it may relieve some pressure, it is a relatively small share of the overall housing market. According to 2023 Statistics Canada data, non-residents own 7% of all B.C. condos and 5.6% in Ontario. We believe that politics plays a major role in these decisions as it can be a good slogan on campaign trails. Housing affordability has simply been worsened over the last number of years largely due to lack of supply in many major urban pockets where majority of the new permanent immigrants and temporary workers come to settle. Unless the supply issues are tackled through new strategies and clear long term vision, banning foreign buyers is not the solution this issue.

When Will the Bank of Canada Start Cutting Interest Rates?

This is one of the key talking points in our industry this year -- is the first Bank of Canada rate cut coming in March, April, June or July (there is no scheduled announcement in May)? Canadian market participants expect the Bank of Canada to start lowering its key policy rate from a 22-year high of 5% in April, the same as their previous forecast, according to a survey released by the central bank on Monday. However, the bank's fourth-quarter survey of Canadian market participants, which includes economists and financial strategists, was conducted from Dec. 18 to Dec. 29 - before official data for December showed an acceleration in inflation.

While either March or April rate cut will be a welcoming relief for many Canadians struggling with high costs of living (mortgage expenses being one of the key factors), in our view, the central bank will be a bit cautious in their approach and won't make any cuts until mid-year with June or July being our best guess. Inflation continues to be a sticky topic and with the housing market showing early signs of life since the start of 2024, any quick rate cut decisions may reverse the progress on slowing down the economy. And we could again be in an unknown and uncertain territory leading to confusion in the consumers mind. And based on our experience in the real estate market, people simply stay on the sidelines when there's uncertainty and confusion about the monetary policy.

We're privileged to be your source of information and understanding of what's happening within our local economy and the real estate landscape. If you have any questions or would like to chat further, please don't hesitate to reach out.