If Google search terms are any indication, a lot of people are wondering if the Toronto real estate market is heading for a crash in 2024. The short answer is no, but the outlook for the market is mixed. Some forecasts point to a gradual recovery in sales and prices as we move deeper into 2024, but the most significant factor still comes down to interest rates.
The Bank of Canada interest rate has risen for nearly two years, and rates remain high, although the general consensus is that there may be a slight decrease throughout 2024. An Ipsos poll conducted for Global News in December revealed that 73 per cent of those surveyed said high interest rates are keeping them from buying or selling.
According to the Bank of Canada, as of January 17, 2024, the average posted rate for a one-year fixed-rate conventional mortgage stood at 7.84 per cent. The corresponding rate for a three-year fixed mortgage was 7.05 per cent, and the Canada 5-year mortgage was 6.89 per cent. With rates like these, it’s no surprise that buyers are waiting.
Prices are going up, too. Royal LePage’s 2024 Market Survey Forecast predicts that the aggregate price of a home in Canada will increase 5.5 per cent to nearly $850,000 by the end of the year. Royal LePage expects the aggregate price in the GTA to rise 6 per cent to $1,198,012. The median price of a single-family home is forecast to go up by 7 per cent to $1,481,950 and the median price of a condo is expected to jump 5 per cent to $754,845.
There’s uncertainty about the economy and the real estate market among consumers. Karen Yolevski, Chief Operating Officer at Royal LePage Real Estate Services Ltd., says Canadians want to buy but are hesitant. “We know there are still buyers on the sidelines waiting for interest rates to come down. What is unclear is how many can afford to jump back into the market at the first sign of a reduction, and how many truly cannot afford to transact in this environment.”
While interest rates are key to an increase in market activity, mortgage renewals are also a factor. The Royal LePage report notes that many potential move-up buyers who have been paying low interest rates will take the renewal as an opportunity to sell and trade up.
“The GTA is Canada’s most densely-populated region and continues to be the top destination for newcomers,” says Yolevski. “Despite a temporary drop in sales, there remains a huge gap in the number of homes available and those needed to satisfy demand from middle-income earners.”
More investor-owned properties may come on the market as their mortgages come up for renewal. Instead of paying higher interest rates, investors may decide to sell their properties and pocket their profits. Yolevski says this may add inventory, but probably not enough to reduce prices.
HGTV recently spoke with real estate agents across Canada and asked them to share their housing market predictions for 2024. Toronto’s Jacob Berkenblit agrees that interest rates are key. But another important factor is a growing population with an insufficient supply of homes.
“If it were me and I were renewing a mortgage in 2024 or purchasing a home in the spring of 2024, I would strongly consider a variable-rate mortgage and expect 2021/22 home prices in 2024,” he told HGTV. “As rates trend downward, buyers will slowly return to the market, increasing demand on a limited supply.”
For now, it’s a waiting game to see what interest rates will do and how that will affect the Toronto real estate market. Patience is a virtue.