What Trends are we Seeing?
Here we go again! January 2023 saw an influx of activity when the Bank of Canada had announced it would hold interest rates for the foreseeable future. The increased activity resulted in the Bank of Canada deciding to subsequently increase interest rates that commenced a downward price trend in June 2023. A year later with expectations of an interest rate drop in the second or third quarter of this year, January 2024 saw a 37 percent increase in the number of transactions compared to that of January 2023 with a nominal price decline of one percent.
What Lies Ahead?
The Bank of Canada is taking a definitive stance that interest rates alone will not be able to fix the housing market’s dilemma of expected reduced affordability due to increased competition. With the housing market making up the largest single component of inflation at six percent, the Bank of Canada has noted it will take other measures to address the support needed for the 1.8 million newcomers that came to Canada in the last 18 months. This added pressure to the demand side plus the Canadian Mortgage and Housing Corporation (CMHC) forecasting that 3.5 million additional homes would be needed on top of expected growth in order for 2030 to reach affordability. We read this is a warning shot to Federal, Provincial and Municipal governments to act beyond observation of the Bank of Canada’s monetary policy.
While the Federal Government has announced an extension to the Foreign Buyers Ban, it is widely thought that this move is politically motivated rather than positively impacting the housing sector. It is estimated that, according to the latest data from Statistics Canada, non-resident ownership in a metropolitan area like Toronto where foreign buyers flock to was only 2.6 percent. What may be missed in this particular policy is that a large share of foreign buyers purchase high-end properties and by removing these buyers from the market results in tax losses and dampens the wealth creation for more affluent Canadians who benefit from the price gains at the higher end of the real estate spectrum.
It is widely understood that contributing to the supply shortages is the lack of skilled trades. We have recently seen an increase in those enrolled in training providing a glimmer of hope that the levers may soon be in place to increase supply. The illustration below shows the number of new registrations in apprenticeship programs which include many of the skilled trades needed to build houses.
With the unemployment rate at 5.7 percent according to the February 9, 2024 figures by Statistics Canada, at the surface things seem positive. However, the lower rate had more to do with the decline in participation rate than increase in jobs. Coupled with a five percent wage growth it is exactly why the Bank of Canada needs to hold rates steady until later this year.
With expected interest rate decreases later this year, lower supply of properties for buyers to consider, continued increase of newcomers to Canada and consumer confidence it is likely exponentially unwarranted for us to expect prices to decrease. It is widely thought that 2024 will bring the second highest average price that the Toronto Regional Real Estate Board has seen (February 2022 being the highest).
What is Happening with Sale Prices
| Sale Price Comparison | ||||
| Product Type | Changes from January 2023 to January 2024 | Changes from December 2023 to January 2024 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | +5.7% | +0.1% | -3.5% | +1.3% |
| Semi-Detached | +4.3% | +1.8% | +2.2% | -1.8% |
| Townhouse | -8.8% | +2.9% | -18.7% | +0.5% |
| Condominium | +0.1% | -2.7% | -1.5% | 0% |
Number of Transactions Trend
When comparing January 2024 to January 2023, we saw the following trend:
| Categories | January 2024 | January 2023 | Percentage Change |
| Number of Transactions | 4,223 | 3,083 | +37% |
| Number of New Listings | 8,312 | 7,836 | +6.1% |
| Number of Active Listings | 10,093 | 9,300 | +8.5% |
When comparing January 2024 to December 2023, we saw the following trend:
| Categories | January 2024 | December 2023 | Percentage Change |
| Number of Transactions | 4,223 | 3,444 | +22.6% |
| Number of New Listings | 8,312 | 3,886 | +113.9% |
| Number of Active Listings | 10,093 | 10,093 | -2.7% |
Looking into the different geographic pockets of Toronto and the GTA we notice the following changes in number of transactions when comparing January 2024 year-over-year to January 2023 and month-over-month to December 2023. The breakdown per area and product type are as follows:
| Number of Transactions Comparison | ||||
| Product Type | Changes from January 2023 to January 2024 | Changes from December 2023 to January 2024 | ||
| Toronto | GTA | Toronto | GTA | |
| Detached | +7.5% | +32.9% | -7.8% | +22.0% |
| Semi-Detached | +26.2% | +51.9% | -17.2% | +20.9% |
| Townhouse | +42.4% | +57.3% | +17.0% | +24.1% |
| Condominium | +46.4% | +31.4% | +37.8% | +49.2% |
Footnote: Source of statistical data is from the January 2024 and December 2023 Market Watch report of the Toronto Region Real Estate Board (TRREB) MLS.
A – Monthly Percentage Change in the Number of Units Sold
B – Month Over Month Average Price Percentage Change
C – Seasonally Adjusted Month Over Month Average Price Percentage Change
D – Monthly Percentage Change in Average Sale Price
