The Toronto Regional Estate Board (TRREB) is forecasting that the Greater Toronto Area’s housing market is in for a palpable rebound in 2024, with sales expected to clamber upwards and supply-demand conditions on track to tighten as the year unfolds.
More specifically, TRREB’s housing market outlook for 2024 says that sales are expected to jump up to 77,000 by year-end, marking close to a 17% rise from the 66,000 transactions reported in 2023. Meanwhile, new listings are anticipated to “hover” at around 150,000, which is historically low but represents an improvement over 2023’s levels.
“However, this level of listings will not be conducive to balanced market conditions as demand picks up over the next two years,” says the outlook. “With sales accounting for a greater share of listings in 2024, expect the average selling price to grow by almost 4% to $1.17M — the second highest mark on record but still below the 2022 peak.”
The direction of mortgage rates will be the “key determinant” of the GTA’s housing market in the year to come, notes TRREB. According to an Ipsos survey conducted for TRREB at the end of 2023, almost half of respondents are “unlikely to purchase a home in 2024,” and suggest that mortgage rates would need to “decline noticeably” before they could consider broaching the market.
With borrowing costs expected to fall back in the year to come, TRREB says there should be a “substantial positive impact” on housing affordability and overall market mentality.
“The Ipsos survey found that the average intended down payment for a home purchase in 2024 is 32%. Assuming this down payment, a one-percentage-point dip in the average negotiated five-year fixed rate for the average priced home at the end of 2023 would result in a $500 per month payment reduction,” says TRREB.
Newcomers Keen To Own Homes In 2024
Even as borrowing rates begin to come down later this year, the GTA’s market won’t be without headwinds, TRREB’s outlook warns. More pointedly, Canada is expected to see an influx of approximately 500,000 newcomers annually over the next three years, and per historical norms, the bulk will likely end up settling in the GTA.
“This influx of population will result in growing demand for housing broadly – both rental and ownership,” says TRREB.
Interestingly, TRREB’s outlook highlights findings from the Ipsos survey: Immigrant respondents, defined as those who immigrated to Canada in the past ten years, have indicated that they are more than two times as likely to purchase a home this year compared to the population on the whole, at a ratio of 21%-to-9%.
“Most of these recent immigrants (68%) would also be first-time buyers, so net-new entrants to the GTA homeownership market versus 42% for respondents as a whole,” TRREB says.
“Recent immigrants also indicated that their home purchase prices would be higher on average compared to all respondents combined. The average intended purchase price for recent immigrants was almost $1.05M, whereas the average intended purchase price for all respondents was $942,000.”
Lack Of Supply To Remain A “Substantial Problem”
Rapid population growth in 2023 underlines the need for more housing supply across the GTA — however, affordability challenges plagued new housing development last year, and that was clear from the number of housing projects that were delayedor cancelled completely. The obvious implication is that desperately needed supply will not be coming online any time soon.
“However, housing supply does not just come from new construction,” says TRREB. “New listings of existing homes have flatlined, at best, over the past decade. In 2023, new listings were down substantially compared to already low levels in 2022. Relative to the stock of housing, listings have actually declined further. The Ipsos survey conducted for TRREB in November and early December 2023 suggests that we will not see a meaningful increase in listings in 2024.”
Those survey results additionally reveal that the number of existing homeowners who are “likey” to list their homes for sale in 2024 has dropped by two basis points to 37%.
“More alarming is the fact that those who indicated they were very likely to list dropped by four percentage points to 14%,” TRREB also notes.
Relief For Condo Rental Market As Homebuying Rebounds
On a brighter note, TRREB is forecasting some degree of relief for the GTA’s condo rental market in 2024. This is despite the fact that the market was remarkably tight over 2023, characterized by sky-high rents and sweltering demand that pulled condo vacancy down to a historic low of 0.7%, according to recent data from the Canada Housing and Mortgage Corporation.
Low vacancy and rapid population growth have kept rents inexplicably high, and, according to TRREB’s outlook, this could end up pushing people out of the rental market completely.
“Thirty-three percent of respondents to the Ipsos survey who are currently renting indicated that any further rent increases would force them to seriously consider purchasing a home. Arguably, this share could increase further as mortgage rates decline in 2024 and 2025,” says TRREB.
“The movement of some renter households into homeownership over the next year could free up some much-needed rental space. But in the absence of more supply, both in the purpose-built and secondary rental markets, conditions are expected to remain relatively tight and average rents to remain high historically in 2024.”