Sean's Market insight Volume 3

Sales Spike Across GTA, Resale Market on the Rise

The Toronto Regional Real Estate Board reported an increase in both home sales and listings in February compared to last year. However, adjusted sales were lower compared to the previous month. According to the board, sales rose by 17.9 percent year-over-year to 5,607 units, or 12.3 percent when factoring in leap day. Experts attributed this surge to population growth, a robust economy, and the anticipation of a halt in interest rate hikes.

New interest in home buying trend seen in comparison to 2023, with consumers expecting potential rate cuts in the near future. Many homebuyers have also adjusted to higher mortgage rates over the past two years. The average selling price saw a modest increase of 1.1 percent from last year, reaching $1.11 million, with a similar uptick from January.

To mitigate higher monthly payments, buyers may have opted for a larger down payment, chosen more affordable housing options, or explored different locations within the Greater Toronto Area. In the City of Toronto, sales totaled 1,971 units last month, marking a 13.7 percent increase from February 2023. Meanwhile, home sales throughout the rest of the GTA surged by 20.4 percent to reach 3,636 units.

Toronto's Midtown, The Resilient Market

While many areas in the low-rise sector of Toronto have remained relatively stable compared to the same period last year, the city's midtown neighborhoods have experienced notable growth in the last few months. Here are some key insights:

· In Rosedale and Moore Park, the average home prices reached $2.08 million, marking a 7 percent increase from January 2024.

·?The Annex and Yonge-St. Clair areas witnessed an average home price of $1.56 million, showing a robust increase of 7.6 percent from January 2024.

These price trends contrast with the city-wide averages, where homes in the City of Toronto command an average price of $1.07 million, while those in the Greater Toronto Area average $1.11 million.

Rate Cut, Race ON

Consumers are eagerly awaiting potential rate cuts in second half of 2024, as a growing number of homebuyers have grappled with elevated mortgage rates over the past two years. The impact of inflation and heightened borrowing costs has notably affected affordability, particularly evident in the interest rate-sensitive housing market. However, there seems to be a glimmer of hope on the horizon.

Bond yields, which serve as the foundation for fixed-rate mortgages, have been steadily declining, and an increasing number of analysts are predicting rate cuts by the Bank of Canada in the second half of 2024. Such reductions in rates will provide relief for existing homeowners and aspiring buyers struggling with affordability. I believe even a modest rate cut by Bank of Canada, will unleash a significant portion of the pent-up demand that has accumulated over the past couple of years.

This marks the conclusion of the longest period of stagnation in Canadian and Ontario real estate in the past 25 years.

Slowest market in New Condominium sector since 2008 Financial Crisis

New condo sales plummeted by 41% in 2023, reaching a 15-year low in the Greater Toronto Area (GTA). With only 12,716 new condominiums sold throughout the year, this figure marked a significant decline from the 21,433 units sold in 2022 and the 30,619 units sold in 2021, representing the slowest total since 2008, when 12,593 units were sold. This downturn was only the third instance in the past 20 years that annual sales fell below 13,000 units, sharply deviating from the long-term trend level of approximately 25,000 units.

In the fourth quarter of 2023 alone, GTA new condominium sales totaled 3,070 units, reflecting a 10% decrease compared to the previous year.

Additionally, new condominium projects launched for presales in 2023 experienced an average absorption rate of 48%, a notable decrease from the 65% absorption rate seen for new launches in 2022 and the record-high 82% absorption rate recorded in 2021. The 10-year average absorption rate for new presale launches stood at 67%.

Moreover, a shift in market dynamics was observed in the 905 Region of the GTA, as evidenced by the increase in market share. While the City of Toronto saw a drastic 48% decline in new condo sales in 2023, reaching a more than 20-year low with 6,498 units sold, the 905 Region experienced a 30% annual decline, reaching a five-year low with 6,218 units sold. Consequently, the share of new condo sales in the 905 Region rose from 41% in 2022 to 49% in 2023.

Developers waiting on sidelines to launch new condo projects

Amidst a substantial buildup of inventory and sluggish sales, developers continue to exhibit reluctance in launching new projects. Forecasts indicate that overall project launches for high-rise towers in the city are expected to remain subdued this year, as developers prioritize the completion of existing inventory projects from 2023 and under-construction projects.

However, amidst this cautious atmosphere, two condo developers have garnered attention for their upcoming spring launches:

1. Deveron Development, 101 Spadina: Targeting end-users, Deveron aims to attract a diverse range of residents to 101 Spadina. Their vision encompasses single individuals, young couples, families with small children, as well as those with older children and downsizers.
2. Freed Developments, Freed Hotel and Residences: This ambitious project seamlessly blends luxury living with downtown convenience. Imagine a lifestyle where renowned restaurants, bustling retail outlets, esteemed educational institutions, and crucial transit connections—such as Osgoode and St. Andrew subway stations—are mere steps away.

The anticipation for these projects is palpable within the development industry, with many—including myself—cheering for their success. These projects hold the potential to set a benchmark for other developers planning respected launches in the latter half of 2024.

Sources:

1.?????? Toronto home sales up in February from last year as consumers eye rate cuts - BNN Bloomberg

2.?????? How downtown Toronto changed by neighbourhood ( thestar.com )

3.?????? Toronto home sales up in February from last year as consumers eye rate cuts ( thestar.com )

4.?????? Bank of Canada interest rate decisions - The Globe and Mail

5.?????? GTA New Condo Sales Fell to 15-Year Low in 2023 | Urbanation