No one has a crystal ball to tell the future, least of all real estate agents!
It is the time of the year when economists, banks, and, of course, real estate agents make their predictions for the market (we are no exception). Some predictions are better than others, but many straddle the line between ludicrously optimistic to outrageously catastrophic. I'm not surprised. There is more political and economic uncertainty in Canada than we have seen in my lifetime. We are currently without a de facto Prime Minister; the USA is threatening tariffs, and the BOC's interest rate is diverting from the FEDS. There is a lot to unpack there, but ultimately, these will all have major impacts on the economy and, in turn, the real estate market. We'll do our best to provide our market outlook for 2025.
The Condo Market will be slow!
Let's start with the obvious. The condo market has been slow for two years but has only begun to see an actual price decline in the last quarter. Condo inventory broke a record high in Toronto, reaching over 6,000 active listings in June. Investor sentiment is low - monthly cash flow went negative in early 2022, interest rates are still sitting above 4%, and Canada's largest renter pool - temporary residents, is on the decline. The GTA is also expecting its largest completion of pre-construction units this year. There will be little incentive for investors to jump into the condo market with rapidly climbing inventory, dwindling rental prices, and higher-than-anticipated interest rates pushing cash flow deeper into the negative. The GOC is trying to soften the blow by implementing demand-side stimulus to allow buyers to take on more debt (insured mortgages up to $1.5M) for longer (30-year amortization for new construction/ insured mortgages). However, without leadership providing guidance, Canada will likely be unable to implement new policies for the next several months.
Cherry Picking in the Housing Market
In some niches, the single family home market (SFH) will be red hot, and others will be ice cold. There is a lack of urgency in the housing market as buyers contend with rising borrowing costs, elevated unemployment, falling consumer sentiment, and rising loan delinquencies. With all the doubts looming, Canadians still love their real estate. Home buyers are idling at the starting line, passively browsing homes on the market, until that 'perfect' home hits the market, and then it's off to the races. The problem is, it seems, every buyer is waiting for that same house. The best homes are being cherry-picked, receiving multiple offers, pre-emptive offers, and selling above expectations. Yet, there is a puzzling number of houses overlooked. This trend will likely continue through 2025.
The 905s (289s and the new 365) will be soft.
In most market cycles, Toronto and its neighboring regions fluctuate congruently. As one increases, so does the other one, and vice versa. The intermigration of the two shifts with affordability and people's desire to find the house that best suits their budget (and often commute). However, since 2017, we have seen a large group of investors and immigrants move to the suburbs. The trend was accelerated by the pandemic and the need to socially distance (both physically and mentally) from each other. As the economy contracts in capital and population, there will be a greater impact on the Peel, York, Halton, and Durham regions. Expect houses in these areas to take longer to sell, with the best ones going first.
We'll continue our standard of data and information-based reporting every month in 2025!
Stay tuned,