Metro Toronto
Real Estate Trends and Price Forecast

HIGHLIGHTS

• Home values in Metro Toronto have been volatile in recent years, see-sawing up and down since 2021.

• Industry experts declared that market conditions were improving early in the year compared to 2023, but that’s no longer true.

• A multi-factor analysis identifies Metro Toronto as a higher-risk real estate market.

• Budgets for home purchases are under strain due to the higher mortgage rates.

• Promised rate cuts have finally arrived, but appear to be too little and too late.

• Demand (purchases) in 2024 is lower than in 2020 when the pandemic disrupted home viewings, and in 2023, when we hit peak mortgage rates.

This report covers:

1. What is the state of the Toronto property market?

2. Where are prices headed?

3. Should investors sell?

4. Is this a good time to buy?

1. What is the state of the Toronto housing market

Home Price Overview

Metro Toronto has a population of roughly 6.4 million and was ranked 23 of the best 100 cities in the world.

During the pandemic, ultra-low mortgage rates turbocharged Metro Toronto’s housing market, driving up prices remarkably and pushing aspiring homeowners further away from their dreams.

Post-pandemic, the federal government embarked on an aggressive immigration program to find replacement workers for retiring baby boomers. This combined inflation and higher mortgage rates led to higher aspirational or “latent” demand but worse affordability than in the 1980s when mortgage rates were above 10 percent. Even more potential buyers now sit on the sidelines.

For those contemplating selling their homes, waiting until next Spring might bring some advantages if you aren’t in a hurry. Spring is the best time to sell because there is typically less supply. Buyer activity in Canada usually peaks in May. Families like to move over the summer so their kids don’t need to switch schools in the middle of the year. This is the typical annual real estate cycle.

On the other hand, prospective homebuyers might consider waiting for a lighter mortgage burden. Mortgage rates are relatively high. Unfortunately, buyers will need patience because rates, even though they have begun to drop, are anticipated to remain higher than average until 2025.

The market fundamentals are riddled with risk and uncertainty as consumer sentiment has taken a substantial hit. But remember, consumer sentiment can be volatile and is an unreliable predictor of future price trends.

GTA Detached House Prices

Since the peak in Spring 2022, prices have ridden a roller coaster. There have been two peaks since 2022, and prices are now on a downswing.

We believe politicians hope to guide the market toward a typical annual real estate cycle with price growth of 1% to 3% annually— in line with income growth.

Demand (purchases) in the GTA is low. Many people want to buy a home, but affordability is so poor that would-be buyers have been sidelined. Significantly fewer people can realize their homeownership dream in these market conditions.

New homebuyers can’t afford to get onto the first rung of the homeownership ladder, and high rates prevent existing owners from taking the next step. Fewer households that want to upgrade to a larger home can qualify for a new mortgage at the current rates.

Price rises were mainly fuelled by the low supply of active listings, but today, listings are running higher than in the past 3 years.

Metro Toronto New Construction Home Prices

Prices of new homes have been falling, and some homebuyers might find they will have paid much more than the more recent buyers in their development. Based on economic fundamentals, they will likely continue to drop.

As a pre-sale buyer, be sure to demand a discount.

Does this concern you? Read the Pros and Cons of Buying Pre-sale Homes

Pre-sales have also softened significantly.

Market Risks

Based on Mortgage Sandbox Analysis, Toronto is at moderate risk of a significant market correction.

Metro Toronto Condo Apartment Prices

After breaking records during the pandemic, Metro Toronto apartment prices are trending downward.

Purchases have dropped off dramatically this year compared with the previous three years, while there is a record-breaking inventory level. Typically, these conditions lead to price concessions.

A 2023 report by CIBC and Urbanation “found that, on average, condo investors that closed on their newly completed units in 2023 experienced negative cash flow to the tune of $597 per month.”

With more people working from home, we expect developers will begin marketing larger (i.e., 2 and 3 bedrooms) apartments to meet buyer preferences. As the supply of more generous floor plans comes to the market, it may depress the values for small floor plan condos.

At Mortgage Sandbox, we would like developers to build 4 and 5 bedroom condos because:

• Not everyone can afford to buy a house for their family.

• Canadians who work from home need more room to segregate workspace from living space.

• Many Canadians with longer working hours find it challenging to stay on top of necessary house upkeep (i.e., mowing lawns, clearing eaves, shovelling sidewalks).

• Many people prefer to live in higher-density neighbourhoods with all the essential amenities within walking distance.

Metro Toronto Townhouse Prices

Still a challenge for first-time homebuyers

Toronto home prices are not affordable.

A first-time homebuyer household earning $97,000 (the median Metro Toronto household before-tax income) can only get a $345,000 mortgage. If they were to save a $85,000 down payment, they would only be able to buy a home valued at $430,000. The Median condo apartment price is over $600,000, so for them to buy a typical condo apartment, a household needs an inheritance or a very generous gift from family. For most people, that is not possible.

What about the rest of Canada?

Read the Ottawa Forecast, Montreal Forecast, Hamilton Forecast, and the Vancouver Forecast.

2. Where are Metro Toronto prices headed?

There is a lot of uncertainty in the forecasts for 2024, 2025 and 2026. Many of the forecasters we've surveyed have different expectations for:

• Will the federal government achieve its aggressive immigration targets?

• How long will mortgage rates remain high?

• Will Canada experience a recession?

There is no consensus among economists.

How do we arrive at our forecast range? Check out our full assessment of the five factors that drive these forecasts. These five forces help explain why several forecasters are anticipating price drops.

At Mortgage Sandbox, we provide a price range rather than attempting a single prediction because many real estate risks can impact prices. Risks are events that may or may not happen. As a result, we review various forecasts from leading lenders and real estate firms. We then present the most optimistic estimates, the most pessimistic prediction, and the average forecast.

Would you like to learn more about real estate risk? We've written a comprehensive report explaining the uncertainty level in the Canadian real estate market.

Our forecast inputs:

• CMHC Housing Outlook

• Fitch Ratings Global Housing Forecast

• Reuters Housing Forecast Poll

• Royal LePage House Price Forecast

• RE/MAX Housing Market Outlook

• Canadian Real Estate Association Quarterly Forecast

• RBC Home Resale and Price Forecast

• TD Bank Economic Housing Outlook

• BMO Housing Outlook

• C1 Central 1 Ontario Outlook

3. Should Investors Sell?

From a seller’s perspective, more changes in the market influence prices downward, so now may be a better time to sell than in two years.

While the annual real estate cycle usually favours sellers in the first half of the year. But if prices drop significantly between now and Spring, then sellers who waited will be listing at a lower price.

Sellers should always consult a mortgage broker early to prioritise flexible loan conditions and reduce the risk of mortgage cancellation penalties. Find out more about the benefits of a mortgage broker.

Planning to Sell? Check out our Complete Home Seller’s Guide.

4. Is this a good time to buy?

It’s hard to say. Prices have been falling, but interest rates (borrowing costs) are high, so prices could fall further. It's almost impossible to time the market perfectly. If you are buying your forever home and don't plan to sell for ten years, then the risks of buying now are lower.

Regardless, the annual real estate cycle usually favours buyers in late summer and autumn.

If you are considering buying, be sure to drive a hard bargain and pay as close to market value as possible. Also, don't bite off more than you can chew when it comes to financing.

Planning to Buy? Check out our Complete Home Buyer’s Guide so we can walk you through the end-to-end process and get you ready to buy your new home!

Here are some recent headlines you might be interested in:

• Toronto home sales rose in September as buyers took advantage of lower rates, prices | CTV

• Condo rents in Toronto region dip for first time in 3 years | BNN Bloomberg

• Toronto newcomers paying up to 12 months' rent up front to secure housing | CBC News

• Sales of new and presale condos plummet in the GTHA, data firm says | CBC News

• Wave of mortgage renewals drives owners to list homes, analysts say | Global News

• Supply in Canada's property market surges as mortgage renewals loom | Reuters

• Young People in Canada Are Trading Toronto for Cheaper Suburbs and Cities | Bloomberg

• ‘It’s crickets’: How sellers are getting creative in a slow housing market | Global News

• Toronto housing market sees spring sales slowdown that puts buyers in the driver's seat | Financial Post

• Re/Max Canada's president speaks out on the housing crisis — and why the real estate market is about to heat up, yet again | The Star

• Spring brings sellers out; buyers remain hesitant | RBC

• These are the areas where Ontario housing prices could see the biggest drop | CTV News

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