As we navigate the ever-changing Greater Toronto Area (GTA) landscape of the real estate market, it’s crucial to stay informed about the latest trends and predictions.  It can be challenging to predict what will happen in the future.  In this blog update, we delve into the current state of the market, touching on key factors such as interest rates, inflation, housing demand, and economic indicators. 

Interest Rates and the Bank of Canada (BOC):

 
 
The Bank of Canada’s recent decision not to increase rates may signal a potential shift in future rate changes.  Many experts argue that the BOC may have overshot rate increases, with a rapid climb from 1.75% to 5% in just 18 months.  While the next year might pose challenges for mortgage renewals and variable-rate holders, there’s optimism that the BOC may start to reduce the overnight rate within the next 6 months or by mid-next year. 

Inflation and Housing Affordability:

 
 
Inflation during the pandemic was initially driven by super cheap rates and supply challenges, but as the market normalizes, profit margins are stabilizing.  However, the aggressive surge in mortgage interest rates has led to a 30% increase in mortgage payments, contributing to ongoing inflation.  The stress test is also impacting buyers’ ability to qualify for a mortgage and therefore enter the real estate market, leading some to rent, thereby driving up rental costs by 7%. 

Housing Demand and Immigration (Population Growth):

 
 
Despite the current economic challenges, demand remains robust, fueled by a significant influx of immigrants to the country.  Housing construction struggles to keep up with this demand, contributing to the current market dynamics.  While pent-up demand is still prevalent, potential buyers are adopting a wait-and-see approach, affecting the length of time for homes that are listed to sell.   

Job Market and Economic Indicators:

 
 
The job market is normalizing, with unemployment rates rising and job vacancies decreasing.  The quit rate, which spiked during COVID, has returned to 2019 levels.  These indicators, combined with the slowdown in the economy, Homes are currently taking longer to sell, and sellers need to adjust their expectations based on current market conditions if they want to sell.    

Condo Market Challenges:

 
 
The condo market in Toronto is facing unique challenges, particularly for investors with variable-rate mortgages experiencing negative cash flow.  A spike in condo listings is evident. , and the recent tax changes to Airbnb may further impact condo inventory in the near future.  The federal government recently announced that owners of short-term rentals will not be allowed to deduct expenses from rental income moving forward for short-term rentals with some exceptions such as renting space in primary residences and cottage properties. 

Looking Ahead:

 
While the current situation poses some challenges for sellers and buyers, there is s glimmer of hope on the horizon.  Economic indicators point to the BOC potentially starting to lower the overnight rate sometime between May – July 2024.  The Bank of Canada has recently softened its language to imply that inflation doesn’t necessarily need to reach the target of 2% before it will consider starting to drop the overnight rate, which suggests a more flexible approach to monetary policy.
 
As we navigate these complex market dynamics, staying informed and adapting strategies according is key for buyers and sellers alike.  Keeping a close eye on the economic indicators and central bank decisions to anticipate potential shifts in the real estate market will be key.   My recommendation to buyers is if now is a good time to buy, you can get qualified for a mortgage and feel comfortable carrying the monthly mortgage payments now is an ideal time to get actively looking for your dream home.  As of now you have negotiation power and can include conditions to ensure your purchase is a good investment you also have more inventory to pick from and will most likely not have to compete with other buyers when you find the perfect home for you.
 
Do you have questions about buying or selling in our current market?  Reach out and let’s chat.