2024 was not quite the annus horribilis that the real estate resale market experienced in 2023, but it was still an extremely challenging year, with year-end results marginally better than the previous year. In 2023, the Toronto Regional Real Estate Board reported 65,877 properties sold. By year-end, approximately 68,500 homes will have changed hands, a modest 4 percent improvement.

These numbers can only be appreciated when viewed from a historical perspective. Throughout the decade leading up to the COVID-19 pandemic annual sales averaged over 90,000 properties, with 113,040 sales in 2016. The highest number of sales ever recorded was 121,712 in 2021 during the height of the pandemic. Sales in 2024 are, sadly, consistent with those recorded in the late 90s. For example, in 1997, 69,530 properties traded hands.

2024 was an uneven year. It was historically slow for the first nine months. In its fight to tame pandemic driven inflation, the Bank of Canada had, by July, increased its overnight lending rate to 5.00 percent, a rate not seen in decades. Bond rates also increased, resulting in fixed-term, five-year mortgage interest rates approaching 6.00 percent.

Unlike previous real estate recessions, there was no decline in the average sale price for all properties sold. In 2023, the average sale price came in at $1,126,266. This year, it will come in at around $1,120,000, a marginal difference. Condominium apartment sales were the weakest, and condominium apartment sale prices lost ground throughout the year, unlike ground-level homes—detached, semi-detached, and townhouses—which strengthened throughout the year. Detached and semi-detached property sale prices averaged approximately $1,265,000 throughout the Greater Toronto Area, and almost $1,500,000 in the City of Toronto.

During real estate recessions, sale prices typically decline. The period between 1990 and 1996 is the most recent example when house prices declined by more than 25 percent. This did not happen in 2024. Firstly, demand has remained strong. Massive population growth over the last few years has resulted in a supply shortage. Secondly, most homeowners enjoyed mortgages with incredibly low rates, unlike the 90s, allowing them to hold their prices until an acceptable offer was presented by a buyer. Although multiple offers declined in 2024, it was not unusual to see bidding wars for desirable properties in sought-after neighborhoods, particularly semi-detached properties in the $1,250,000 price range.

In July, the Bank of Canada made its first rate cut, a modest 0.25 percent, but it was the beginning of more cuts to come. By year-end, the Bank had made six more cuts, bringing the overnight rate to 3.25 percent. With these rate cuts came an improved resale market: mortgage interest rates declined, allowing buyers who had been marginalized by high mortgage rates to re-enter the market. By the end of 2024, year-over-year sales for the last few months of the year were up by more than 40 percent. 2024 is clearly closing on a positive note.

It should be noted that there were major industry changes in 2024. The provincial government implemented Phase II of its regulatory changes, designed to achieve more industry transparency. The legislation came into affect in December 2023 but its effects were not experienced until this year. Buyer and seller representation became more transparent, a concept called “self-represented party” was introduced, a mandatory consumer information guide became available, and perhaps the most dramatic change—the content of offers could be shared with competing buyers by sellers (open bidding). The latter change was in response to the blind-bidding frenzy that was prominent during the pandemic, and the belief that it drove up average sale prices. A year after sharing the content of offers became legal, it has been rarely used. No doubt, market conditions are partially responsible for the lack of uptake in sharing content, but overall consumer (seller) reluctance has been primarily responsible. Unexpectedly and perhaps counterintuitively, buyer resistance to open bidding has been as forceful as that of sellers. This consumer response, both by sellers and buyers, is not likely to change going forward. Phase III changes are expected in 2025.

The Real Estate community is not sad to see 2024 come to an end. It was another challenging year, with wide swings in the Bank of Canada’s overnight rate and legislative changes that have, to some degree, altered the real estate sales landscape. As the year ends, it is comforting to note that the industry has met these challenges and is moving positively and optimistically into 2025. On a year-over-year basis the last few months were the most robust in 2024 pointing to growth in sales in 2025.

Prepared by: Chris Kapches, LLB, President and CEO, Broker

In summary, 2025 indicators point to healthy economic growth, an improvement in borrowing costs, a moderate increase in home sales as well as a moderate increase in average sale prices. There will also be regulatory changes affecting the real estate industry providing enhanced consumer protection and transparency. The future is also clouded with challenges and uncertainties, particularly as a result of political upheaval being experienced in Canada and political change in the United States.

It is strongly anticipated that the Bank of Canada will continue lowering its overnight lending rate in 2025. The year begins with the rate at 3.25 percent. By year end the overnight rate should be down to 2.25-2.50 percent. This will have a positive impact on fixed mortgage interest rates, bringing the five-year mortgage rates to around 4 percent. Although substantially lower than borrowing costs that plagued borrowers through most of 2024, 4 percent is a long way from pandemic rates of 2 percent or lower that drove the real estate resale market to frenzied, record levels in 2021.

2025 will also see the cap on insured mortgages increase to $1.5 million from the previous cap of $1 million. This will enable, primarily, first-time buyers to purchase properties with substantially lower down payments, a hurdle that has marginalized buyers in expensive markets like Toronto and Vancouver.

The combined impact of lower borrowing costs and easier entry into the resale market with lower down payments will see the resale market improve compared to 2024. Sales are anticipated to increase by 6 to 8 percent bringing the total number of sales to the range of 72,600 to 74,000 properties. A welcome improvement over the 2024 total of 68,500, but a long way from the 90,000 sales (on average) achieved annually in the decade before the pandemic.

However, the on-going impediment to sales growth will be affordability. The demand is there. Population growth in the greater Toronto area has been enormous over the last few years, substantially greater than available supply. Unfortunately, household income has not kept pace with borrowing costs and the cost of housing. Even with lower borrowing costs and broader entry into the resale market, buyers will require a household income in excess of $250,000 to qualify to buy the average priced property in the greater Toronto area.

As in the case of sales growth, the growth in average sale prices in 2025 will be modest, somewhere in the range of 3 to 5 percent. The year will begin with the average sale price coming in at $1,120,000 and end in the range of $1,150,000 to

$1,175,000. Once again growth in average sale prices will be constrained by affordability. Buyers may want to pay more but the cost of financing will restrain their ability to do so. Home prices for detached and semi-detached properties will be substantially higher, averaging close to $1,300,000 in the greater Toronto area and more than $250,000 higher in the City of Toronto, exceeding $1,500,000.

Politically, an election will take place in Canada in 2025, and with that a new government which may develop new housing policies that will impact sales and average sale prices. Whatever housing policies are promulgated, their impact will not be felt until 2026. South of the border a new administration will be taking office. It’s possible that the new administration’s policies will create inflationary pressures which will, unfortunately, have an impact on borrowing costs. These pressures, assuming they materialize, will impact the economy in 2026 and beyond.

Ontario’s provincial real estate regulator will be bringing in Phase III of the changes to the Trust In Real Estate Services Act. The new regulations will further enhance transactional transparency, eliminate the financial incentive for inappropriate realtor behaviour, implement administrative penalties for minor realtor infractions, raising the bar on realtor qualifications, and making the regulator, the Real Estate Council of Ontario, subject to ombudsman oversight. These changes are anticipated but not certain. Regardless, the ultimate legislation will provide heightened consumer protection and transparency.

2025 begins positively and optimistically, but not without its uncertainties, especially on the political front. Affordability will remain the real estate market’s major concern, but with welcome signs of amelioration, albeit moderate, ahead.

Prepared by: Chris Kapches, LLB, President and CEO, Broker

2024 has now come to an end, and unfortunately, it finished, to quote T.S. Eliot, not with a bang, but a whimper. Only 3,359 properties were reported sold, almost 2 percent fewer than were reported sold in December of last year. Although in absolute terms, a decline of a mere 60 properties is a small number, it must be remembered that 2023 was one of the most moribund residential resale markets in over 25 years.

In total, 67,610 residential properties changed hands in 2024, a marginal improvement of 2 percent over the 65,877 properties reported sold in 2023. These numbers can only be appreciated from a historical perspective. Throughout the decade leading up to the COVID-19 pandemic, annual sales averaged over 90,000 properties, with 113,040 sales in 2016. The highest number of sales ever recorded for the Toronto Region was 121,712 in 2021 during the height of the pandemic. Reported sales in 2024 were, sadly, consistent with those recorded in the late 1990s.

There were reasons for December’s poor performance. Buyers were disappointed with the lack of movement in fixed mortgage interest rates, notwithstanding the Bank of Canada’s reduction in its overnight lending rate on December 11, bringing the rate to 3.25 percent. Five- year fixed mortgage rates have remained over 4 percent. Additionally, the Federal government increased the cap on insured mortgage loans to $1.5 million. Unfortunately, the changes did not take effect until December 15, too late for buyers to enter the market before the busy holiday season.

In December, the average sale price for all properties sold was $1,067,168, marginally – 1.6 percent – lower than the average sale price for the Region in December of 2023, which was $1,084,757. The Regional average sale price is deceptive. Condominium apartment sales made up almost 30 percent of all reported sales, with condominium apartment average sale prices for the Region coming in at only $681,855. If condominium apartment sales are excluded, the average sale price for other types of properties—detached and semi- detached—becomes substantially higher. Detached property prices averaged almost $1,400,000, and semi- detached property prices were well over $1,000,000. In the City of Toronto, detached property sales exceeded $1,600,000, and semi-detached property sales exceeded $1,300,000. Unlike previous real estate recessions, there was no appreciable decline in the average sale price, which is a contributing factor to the affordability crisis facing buyers.

Overall, 2025 indicators point to economic growth, improvement in borrowing costs, and moderate increases in home sales and average prices, although the future is clouded with challenges and uncertainties, particularly due to political upheaval in Canada and the United States.

Barring the impact of politics on the economy, it is anticipated that by year-end, the Bank of Canada will lower its overnight rate to 2.25 to 2.50 percent. This will have a positive impact on fixed mortgage interest rates, bringing the five-year mortgage rate down to around 4 percent—better, but still a long way from the 2 percent rate enjoyed by borrowers only a few years ago, and certainly not low enough to generate any form of robust or excited resale market.

The combined impact of lower, albeit modest, borrowing costs and easier entry into the resale market for properties valued at $1.5 million or less will result in an improved marketplace compared to 2024. Sales are anticipated to increase by 6 to 8 percent (although this forecast may be a little over-optimistic), bringing total sales for 2025 to the range of 72,600 to 74,000 properties. This will be a welcome improvement but still a long way from pre-pandemic sales numbers. In 2024, sales increased by 2.6 percent compared to 2023.

The growth in average sale prices will likely be even more modest than the growth in sales. The year-end average sale price for 2024 came in at $1,117,600, marginally lower than the average sale price of $1,126,263 achieved in 2023. That number was predominantly front-loaded to sales at the beginning of the year. It is anticipated that average sale prices will increase within the range of 3 to 5 percent. 2025 will begin with an average sale price of $1,117,600 and end with an average sale price of between $1,150,000 and $1,172,000.

Demand remains very strong and will continue into 2025. Population growth in the Toronto Region has been staggering over the last few years, substantially greater than supply. The problem for would-be buyers is affordability. Household income has not kept pace with borrowing costs and housing prices. Even with

the anticipated lower borrowing costs in 2025, buyers will require household incomes in excess of $250,000 to qualify to purchase the average-priced home in the Toronto Region.

The year 2025 begins much more optimistically than 2024, but not without its uncertainties, especially on the Canadian political front and the impact the new American administration may have on the Canadian and more importantly, the economy of southern Ontario and the Toronto Region. Aside from those factors that buyers will have no control over, affordability will remain the market’s major obstacle, although all signs point to improved conditions for buyers, certainly much better than the buying conditions in 2024.

Prepared by: Chris Kapches, LLB, President and CEO, BrokerPrepared by: Chris Kapches, LLB, President and CEO, Broker

The Bank of Canada, as anticipated, reduced its benchmark rate in June, but it did not have the desired market effect. In fact it had the opposite effect. That’s because the rate cut was marginal, only 0.25 percent, not enough to move the resale market needle. Mortgage markets and bond markets had already analyzed and digested the prevailing economic data and had already priced into the Bank of Canada’s rate cut. Except for variable rates, still very lofty at 6.4 percent, there was no movement in fixed five year terms. After the Bank of Canada’s rate cuts, five year fixed term rates remain above 5 percent.

Since the Bank’s rate cut had no impact on fixed mortgage rates, affordability was not affected. Buyers were immobilized by this insignificant rate cut, now hoping for a better financing environment after the Bank meets again in late July.

Sales for the City of Toronto and the surrounding Region totalled 6,213 properties in June, 16.4 percent fewer than the 7,429 sales that were reported last year. The decline in sales was universal, affecting all housing types throughout the entire Region. Condominium apartments, the most financially sensitive housing type, dramatically demonstrated the affordability crisis. Condominium apartment sales declined by over 28 percent, notwithstanding that they are the least expensive housing type. The average sale price of condominium apartment sales came in at $727,861. Condominium apartment sales represented almost 50 percent of the overall Toronto and Region resale market, a huge drag on the monthly numbers.

Notwithstanding the decline in sales the average sale price for all properties sold, including condominium apartments has remained very resident.

In June, the average sale price came in at $1,162,167, marginally lower than it was last year. Even though affordability has plagued the resale market throughout 2024 (and the later half of 2023) the average sale price has continued to rise throughout the year. In January, the average sale price was only $1,025,262. It has increased by more than 13 percent since the beginning of the year.

Inventory has also increased throughout the first half of 2024. At the end of June there were 23,613 properties available to buyers, 67.4 percent more than the 14,108 available last year. This volume is now beginning to push beyond pre-pandemic inventory levels. At the same period, in 2018 and 2019, inventory levels were approximately 20,000. At the end of June there were 8,806 condominium apartment available to buyers. Almost 40 percent of the total available inventory is represented by condominium apartments.

Although sales and average sale prices of detached and semi-detached properties declined, the properties that sold did so in robust fashion. All detached properties in the City of Toronto sold in only 15 days and at 101 percent of their asking price. The average sale price for all detached properties sold came in at $1,758,649. All semi-detached properties sold in only 13 days and, amazingly, for 105 percent of their asking price. In Toronto’s eastern trading districts, all semi-detached properties sold in only 10 days on market and for an eye-popping 110 percent of their asking price. The average sale price for semi-detached properties in June came in at $1,282,000.

At first glance, it is difficult to reconcile the performance of detached and semi-detached properties against the backdrop of declining sales numbers. A deeper analysis indicates that demand, primarily due to population growth, remains strong. The problem is that most buyers can not afford to purchase detached and semi-detached properties with five year interest rates at more than 5 percent. In addition, there is the hurdle of the crippling mortgage stress test amounting to another 2 percentage points. Those that could afford the lofty detached and semi-detached properties aggressively bought them, and in almost record time, paying over the asking prices.

Condominium apartment sales are the weakest sector in the resale market. Inventory levels have increased substantially, approaching almost 9,000 units, as fewer apartments are absorbed by sales. At the end of June there are almost 9 months of condominium apartment inventory in the Toronto and Region resale market. Surprisingly the average sale price in Toronto’s central core for condominium apartments came in at $815,305. This is no doubt due to the fact that out of the 1,014 reported sales 20 of these apartments sold for prices between $1,750,000 to $2,000,000.

So what can the resale market anticipate for July? In a phrase, more of what happened in June. The central force is affordability, or a lack thereof. That will not change in July, although it might in August. The next Bank of Canada scheduled date for announcing its overnight target date is July 24th. It is anticipated that the Bank will once again reduce its overnight target by another 0.25 percent. This will result in five year mortgage interest rates coming down to around 5 percent. That will probably not be enough to significantly move the resale needle, which means that July and August (which are also seasonally slow months) will not be dissimilar to what the resale market experienced in June. A more aggressive rate cut by the Bank will stimulate the market resulting in a dramatic rise in sales.

The April 2024 Market Report concluded with the following forecast for May for the Toronto and Region resale market: “The average sale price will continue to hover around $1,150,000, with sales expected to come in at the 7,000-plus range.” Not surprisingly, May’s results came in as expected. The Toronto and Region achieved 7,013 property sales, and the average sale price came in at $1,165,691. As in previous months, the Toronto and Region resale market has and continues to be constrained by affordability, or more accurately, the lack thereof.

The 7,013 sales achieved in May were almost 28 percent fewer than the 8,960 sales reported last year. Comparisons to last year are not helpful in understanding the current Toronto resale market. Reported sales for May 2023 were the highest achieved in any month last year. The Bank of Canada’s benchmark rate had remained steady at 4.5 percent through the first 5 months of 2023. Buyers had adjusted to borrowing rates and to the extent their household incomes permitted, had enthusiastically entered the resale market. That buying enthusiasm was one of a number of economic factors that caused the Bank of Canada to increase rates in June, and then again in July. By August the resale market was in sharp decline, where it has remained. A decline in reported sales, not demand.

The decline in the average sale price, which was moderate, from $1,195,409 to $1,165,691 was driven by the decline in average sale prices in the 905 region and the 1,942 condominium apartments (almost 30 percent of all report sales) that sold at an average sale price of $730,815. In the City of Toronto, the average sale price for condominium apartments came in higher at $767,064.

In May inventory levels continued to rise. During the month 18,612 new listings came to market, 21 percent more than the 15,363 that came to market last year. By the end of the month there were 21,760 properties available to buyers, more than 83 percent higher than the 11,869 available last year. Although this number appears high by Covid-era comparison, it’s not out of line by historical comparison. For example, in May 2018 active listings totalled 20,919, and in May 2019, the year before the Covid-era disrupted the resale market, there were 20,017 properties available to buyers.

What the year-over-year data does not disclose is the enormous demand in the marketplace. This demand is constrained by a lack of affordability. With Toronto’s average household income before taxes hovering around $110,000 (CMHC) and average sale prices coming in at $1,165,691, many buyers are simply unable to participate in this market. Those that can are still driving a strong, robust resale market.

Throughout the Region, all detached properties sold in only 16 days and for 101 percent of their asking prices. In the City of Toronto, detached properties were reported sold in only 14 days and for 104 percent of their asking prices. The average sale price of all detached property sales in Toronto came in at an eye-popping $1,826,370. Semi-detached properties throughout the Region sold in only 13 days and for 106 percent of their asking prices. In the City of Toronto they similarly sold in only 13 days, but for 107 percent of their asking prices. The average sale price for semi-detached properties in Toronto came in at $1,416,496. Assuming the buyer has saved $284,000 (20 percent of the average-priced semi-detached property), the buyer would need to have a household income of approximately $240,000 in order to qualify for a mortgage of more than $1,100,000. In addition, the buyer would be expected to pay land transfer taxes of almost $50,000. Hence the affordability issue.

Condominium apartment sales continue to lag and act as a drag on the overall market. In May 1,942 condominium apartments were reported sold. On average these apartments took 25 days to sell and at only 99 percent of their asking price. A very different pace than detached and semi-detached property sales. The average sale price for all condominium apartment sales through the Region was $730,000. The poor performance of condominium apartment sales is especially due to affordability. Condominium apartments attract the first-time buyer cohort. First-time buyers, generally with lower household incomes, given prevailing mortgage interest rates and even average sale prices in the $730,000 range, are financially constrained from entering the resale market. It is for that reason the condominium apartment sales are underperforming compared to detached and semi- detached property sales.

As this Market Report was being prepared the Bank of Canada announced a 0.25 percent reduction in its benchmark rate, bringing it to 4.75 percent. The first reduction in four years. No doubt this will help with affordability, but only marginally. Furthermore, since the beginning of 2024 the bond market, and by association the mortgage market, have analyzed and digested current and future economic conditions, and fixed mortgage rates

have likely been priced into the expected Bank of Canada’s rate cut. As a result, there will be very little downward movement in five-year fixed mortgage rates. There will be some downward movement in variable rates.

With all this economic and resale market data at play, we should anticipate similar sales results in June as we saw in May, with some uptick in sales generated by the psychologically improved outlook generated by the Bank of Canada’s rate cut. Separate and apart from the Bank’s rate cut, we will see positive sales variances month-over- month compared to 2023 as we move into the second half of 2024. This is due to the dismal results achieved by the resale market from July through to the end of last year. If the Bank continues with a further rate cut in July the second half of 2024 be substantially stronger than the first half of this year.

A number of commentators have focused on April’s negative variances compared to market results achieved in April 2023. Specifically, the fact that sales declined by 5 percent from the 7,114 residential properties that traded hands this year compared to the 7,487 properties reported sold last April.

In addition, heavy emphasis was placed on the number of new listings that came to market and the number of active properties available to buyers at the end of the month. Last year, 11,509 new properties came to market. This April, 16,941 came to market, an increase of more than 47 percent. By month end, there were 18,088 homes available to buyers, almost 75 percent more than the 10,373 properties available last April.

Year-over-year, lower sales and a dramatic increase in supply may give the appearance of a declining market, but a deeper dive into April’s data tells a very different story.

By April of 2023, the Toronto and Region resale market was ascending rapidly. It was ascending so rapidly that in June and July the Bank of Canada, apprehensive as to the strong real estate market’s impact on rising inflation, increased its benchmark rate to 5 percent (where it currently stands). By August, the resale market was in steep descent. That descent has only been reversed during the first four months of 2024. Often, year-over-year comparisons belie and sometimes distort market reality.

Market reality is more accurately reflected by the speed of sales and their sale price as compared to asking prices. In April, all properties reported sold (including condominium apartments), on average, sold at 102 percent of their asking price and in only 19 days. If condominium apartment sales are extracted from the overall numbers, the results are startlingly positive.

In April, all the detached properties that sold in the City of Toronto “flew off the shelf” in only 15 days and at 103 percent of their asking prices. The average sale price for all detached properties in the City of Toronto came in at $1,822,244. More significantly, all detached properties reported sold in Toronto Central, which encompasses some of Toronto’s most expensive neighborhoods, sold in only 18 days and for 100 percent of their asking price. The average sale price for detached property sales in Toronto’s central districts came in at an eye-popping $2,627,700.

Activity in the semi-detached sector was even more robust. All semi-detached properties that became available in the City of Toronto sold for 108 percent of their asking price, and amazingly, in only 12 days. In the 905 Region, activity for semi-detached properties was just as brisk. All sales took place in only 13 days and at 106 percent of asking prices. Semi-detached properties in Toronto’s eastern districts sold at pandemic-level speed. All semi-detached properties sold in only 10 days and at 112 percent of their asking prices. The average sale price for semi-detached homes in April was substantially higher in the City of Toronto than in the 905 Region. The average sale price in the 905 came in at $1,139,929. Furthermore. the average sale price for semi-detached homes in the City of Toronto was almost 20 percent higher, coming in at $1,365,061.

Condominium apartments, the largest segment of available properties, performed poorly in April, acting as a drag on the overall resale market. All condominium apartments that sold in April did so in 26 days, and at only 99 percent of their asking price, a dramatic divergence from detached and semi-detached activity. The average sale price for all condominium apartments sold came in at $728,067. Sales were off by 9.5 percent compared to last April.

Even more concerning is the number of new listings that came to market. In April, 5,542 new condominium apartments came to the market – almost 33 percent of all new inventory. By month end, 7,015 condominium apartments were available to buyers, almost 40 percent of total available inventory.

There are many factors responsible for the disconnect between the condominium apartment market and the ground level market of detached and semi-detached homes. No doubt the increasing inventory represents investor units purchased before or during the pandemic market. With rising financing costs, these units are financially non-performing, and investors are selling to reduce losses. In addition, many thousands of unquantifiable assignment sales are also on the market, competing with listed condominium apartments, resulting in a glut of available inventory.

At first blush, one would conclude that this would be a market opportunity for buyers. Unfortunately, condominium apartments are primarily the homes of choice for first time buyers. Most available apartments are spatially small. Since 2017, all condominium apartments built in Toronto average only 659 square feet. Two decades earlier, they averaged 1,010, still relatively small but quite livable. The same size reduction in units is true for all condominium apartments built in the greater Toronto Region.

These small condominium apartments remain beyond the economic reach of most first-time buyers, many being immigrants without local family support. In Toronto’s central districts, where 63 percent of the City of Toronto’s sales take place, and 41 percent of all condominium apartment sales in the greater Toronto area took place, the average sale price in April was a lofty $829,501. Given today’s mortgage financing costs, a buyer would need a household income of approximately $175,000 to purchase the average price condominium apartment in central Toronto. Canada Mortgage and Housing reports that the average household income in central Toronto is $109,599.

Clearly, the Toronto and Region marketplace is fractured. The ground-level resale market is strong with average sales prices remaining strong, with detached and semi- detached properties selling quickly and for strong sale prices. The rapidity with which ground-level properties sell speaks to the market’s incredible demand, driven by years of population growth due primarily to immigration.

Demand for condominium apartments appears to have waned, primarily due to space constraints as a result of poor, but economically lucrative (for developers), design developments. In addition, for most first-time buyers, even if they were happy to accept these small condominium apartments, at their current price point, they remain unaffordable.

Looking forward, we can expect similar market results in May. The average sale price will continue to hover around $1,150,000, with sales expected to come in at the 7,000 plus range. To some extent the market is in a limbo state, hanging on every statement uttered by the Bank of Canada, waiting for the much-anticipated rate cut. In June? July?

This first month of 2024 unfolded as anticipated. As 2023 came to an end, an air of optimism began to spread through the Toronto and Region residential resale market. This optimism was driven by the belief that rate hikes by the Bank of Canada were at an end and rate relief was on its way. This was confirmed in January when the Bank met and held its benchmark rate at 5 percent, but more importantly, and for the first time, indicated that it was already planning for rate cuts - it was just a question of when.

This optimism was reflected in January's resale data. The Toronto Regional Real Estate Board reported 4,223 sales for the month. Although not a stellar month, January's sales were 37 percent higher than the 3,083 properties reported sold last year, and 30 percent higher than the 3,435 reported sold in December. The first month-over- month increase since August of 2023.

The average sale price was practically unchanged year- over-year. Last January, the average sale price came in at $1,036,925. This January, it was $1,026,703, a marginal 1 percent decline. The small decline in the average sale price was primarily driven by declining condominium apartment prices in the 905 Region. Year-over-year, they declined by almost 3 percent. Condominium apartment prices in the City of Toronto remained unchanged comingin at $709,419.  The average price for condominium apartments in the 905 Region was $628,375 in January.

A noticeable difference between January 2023 and January 2024 was the length of time properties took to sell. Last year, all properties (on average) sold in just 29 days. This year, that number jumped to 37 days, a substantial 28 percent increase. Even though more buyers purchased homes this January compared to January 2023, they did so deliberately. What is encouraging is that more buyers managed to overcome the affordability challenges that have been restricting the resale market.

Another positive development in the market was the change in availability - although not as dramatic as the change in average days on market. In January, 8,312 new properties came to market - no doubt many of these were relisted properties. Last year, only 7,836 came to market, 6 percent fewer than this year. At the end of January, there were 10,093 homes of all property types available to buyers, 8.5 percent more than the 9,300 available last year.

January's numbers point to improved sales numbers and, no doubt, increasing average sale prices as we move through the year. Buyers took advantage of lower available mortgage interest rates due to lender competition and will become even more active as the economy moves towards Bank of Canada rate cuts, now expected in June. Given the staggering population growth in the Toronto and Region resale marketplace, and the sizeable pent-up demand generated by affordability challenges, all signs point to a very strong resale market for 2024.

It will be interesting to observe what the impact of various legislative changes will have on the City of Toronto's luxury market. Starting in 2024, buyers of high-end real estate will be required to pay egregious land transfer taxes. Buyers of properties having a sale price of over $5 million will be expected to pay a tax of 5.5 percent of the purchase price, 6.5 percent for properties sold over $10 million up to $20 million and 7.5 percent for sales over $20 million. This tax is in addition to the provincial land transfer tax (approximately 2.5 percent of the sale price). A buyer of a $10 million home in the City of Toronto will be expected to pay an eye- popping land transfer tax of $652,950 ($236,475 provincial and $416,475 City of Toronto). In addition, the City of Toronto increased its vacant home tax to 3 percent of the assessed value of properties starting in 2024.

The combined effect of these taxes, in addition to a proposed municipal property tax increase of more than 10 percent, makes the City of Toronto's real estate residential market very expensive compared to other jurisdictions, even within Ontario. These politically motivated measures, though well intentioned, will have the opposite of their intended impact. Toronto is becoming less, not more, affordable.

To paraphrase T.S. Elliot, the Toronto and Region residential resale marketplace is ending the year not with a bang, but a very quiet whisper. November sales totalled 4,236 homes, down by 6 percent compared to the number of sales reported last November. This is the lowest number of sales reported for November since the economic downturn of 2008. As mentioned in previous market reports, the number of reported sales is particularly low when it is remembered that the Toronto Region’s population has grown by more than 20 percent in the intervening 15 years.

November marked the third consecutive month when total reported sales were less than 5,000. As 2023 comes to an end, there is an uncanny similarity to the way the year 2022 ended after the Bank of Canada implemented its punishing benchmark rate hikes.

Notwithstanding historically low sales numbers, the average sale price for all residential properties sold continues to hold firm and is ending the year stronger than last year’s sale prices for the same period. Over the period of August to November, sales were 6.7 percent higher in 2022, whereas average sales prices are 1.5 percent higher in 2023.

Strong sale prices in the face of declining sales are a market anomaly. There is, however, an explanation for this development. Until recently, supply has remained low. Even in November, only 10,545 new listings came to market, 16.5 percent higher than the 9,053 that came to market last year. At month end, there were only 16,759 properties available to buyers. Although this is an increase from previous months, it is still relatively low by historic standards.

The other side of the equation is demand. With the incredible surge in population growth in the Toronto Region, there are many more potential buyers looking for homes. Unfortunately, these buyers are constrained by a lack of affordability. Five-year fixed mortgage interest rates are over 6 percent, and to qualify, borrowers must pass the prevailing stress test, requiring them to qualify at more than 8 percent. There are, however, buyers that do have money and they are the ones participating in the resale market, keeping prices from falling noticeably. Unfortunately, there simply are not enough of them to push sales numbers higher.

This is most evident in the City of Toronto’s resale numbers. In November, the average price for detached properties came in at $1,617,918, 3.5 percent higher than last November. The same was true for semi-detached properties, wherein sale prices came in at $1,217,811, 2.4 percent higher than last year. Only condominium apartment sales and average sale prices retracted. Condo sales in the City of Toronto were down by 8.2 percent and average sale prices declined by 1.7 percent, to $720,280. Although condominium apartments are the least expensive housing type in Toronto, condominium apartments are the housing form sought out primarily by first time buyers who, regretfully, are financially the most vulnerable purchasing group. Almost 70 percent of all condominium apartment sales take place within the City of Toronto. At the end of November, there were 6,579 condominium apartments available to buyers in Toronto and the surrounding Region. Condominium apartments represent almost 40 percent of the Toronto and Region’s available inventory.

Unless the Bank of Canada eases its monetary policy – which is not expected to happen until at least the second quarter of 2024 – sales will remain low, at their current levels. If inventory increases, as expected, then eventually we will see some decline in average sale prices and a corresponding increase in sales numbers. That scenario is beginning to play out now but won’t be clearly evident until the market passes through the Holiday Season. In November, the months of inventory on market moved up to 2.4 months. In tandem, the sales-to-list ratio for all properties that came to market moved to 46.2 percent, approaching the 40 percent buyers’ market threshold. For the third consecutive month, the sale-to-list price ratio came in at 98 percent and the days on market moved up to 25 days, 13.6 percent higher than the 22 days properties spent on the market in November 2022.

These are all indications of a slowing market, constrained by affordability.

As the year comes to an end, only 62,576 properties have been reported sold. It is unlikely that December sales will substantially exceed 3,000, which means that 2023 will end the year with approximately 65,000 to 66,000 reported sales – a number that we have not seen in more than 2 decades. Last year, 75,049 properties were reported sold in the Toronto Region. Between 2010 and the beginning of the pandemic, yearly sales varied, with reported annual sales generally coming in at 85,000 or more. Between the years 2014 and 2017, sales exceeded 90,000 homes sold, with more than 100,000 properties reported sold in 2015 and 2016, while 2018 was an outlier with only 78,107 sales. That was the year the provincial government implemented the foreign buyer’s tax, which currently rests at 25 percent of the purchase price.

To paraphrase Queen Elizabeth’s 1992 speech… “2023 is shaping up to be a real estate market annus horribilis”