Understanding the volatility of the Ontario real estate market means wrapping our heads around the many contributing factors impacting supply, demand, and, frankly, the opportunity to afford it all.
For years, the market has been characterized by dizzying highs and stomach-churning lows. From skyrocketing interest rates to band-aid government policies, the volatility has left many prospective buyers, sellers, and investors feeling apprehensive and uncertain.
Right now, it looks like we’re in an upward trend again. Sales and new listings are up as we head into a spring market, and buyer confidence has grown with the repeated Bank of Canada rate holds — and the possibility of drops in the coming months.
But there are other factors that could easily pull things back down again – continued high interest rates, surging population, and housing shortages remain factors, not to mention changing policies like Toronto’s vacant home tax and the 9.5% approved property tax hike for the GTA.
Let’s go deeper into the factors contributing to current volatility, and look at some insights on how to navigate these turbulent times.
The upside: more showings, more transactions, more listings
TRREB reported 5,607 GTA home sales through the MLS® in February, an increase of 17.9% compared to February of last year. At Right at Home Realty and Property.ca, daily transaction volumes have increased to an average 80 per day, from around 60. Average price is up slightly, and viewing requests on rightathomerealty.com, condos.ca and property.ca are way up, increasing by 42% year-over-year.
Buyers are coming back, with even greater pressure on entry-level properties as higher borrowing costs impact buying power. Once rates start to come down, demand will be driven further, especially with beleaguered renters looking to move away from record rents and into ownership.
The downside: more delinquencies, more uncertainty, more new policies
In a recent article, the Financial Post reported that Ontario mortgage delinquencies are 135.2% above pre-pandemic levels. Pair that with tough economic times, the rising cost of living, uncertainty about borrowing rates, and a volatile political climate, and buyers are being stretched tighter than ever, with their journey to home ownership becoming increasingly complicated.
And it’s not just homeowners who are struggling. Construction companies and developers have been filing for bankruptcy, leaving many buyers in the lurch.
How hot is hot in real estate? Let’s look at three years of March stats
This year, there’s a lot of chatter about the housing market getting back on track, potentially even returning to pandemic-fueled highs. Is that really where we’re headed?
March 2021 was one of the hottest months on record for home sales, with about 16,000 properties sold in the GTA. In 2022, that number plummeted to about 11,000, and in 2023, dropped even further to about 7,000. If the trends tell us anything, we should be looking at about 8,000 sales for March 2024. So, while the market isn’t exactly “on fire” like it’s been in the past, it’s definitely warming up.
Balancing borrowing and buying
The First Time Home Buyer’s incentive program terminates at the end of this month. We’re also seeing a big decline in mortgage originations. Interestingly, private borrowing is on the rise. So, while some buyers are avoiding the volatility of bank lenders, are they making a sustainable decision?
Does supply trump demand?
Buyers are coming to terms with elevated mortgage rates, and are taking advantage of slightly lower prices paired with more inventory. So, while supply was surging for a while there, the increased demand is likely to get through current inventory — and we’ll be back to a frenzied market, greater rural sprawl, and all the other results of a housing crisis.
Is it time for the government to step in? From capping international students to increasing taxes, governments at all levels are working to right this unsustainable situation. But they aren’t doing enough. Short-term fixes may help with immediate needs, but thoughtful, long-term solutions are needed to make a real difference.
Right now, the market is showing a lot of promise, with a spring thaw and increased confidence. But it may not be smooth sailing from here. With all the factors impacting our economy, I predict turbulent times ahead.
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This article was produced in partnership with STOREYS Custom Studio.
