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