Last month, I talked about the real estate market slowdown predicted by Desjardins. But a recent TD Economics report says it has been delayed: record immigration and a resilient real estate market have kept things ticking along. But the downturn is still on its way.
The short-term global economic outlook remains weak. Inflation has been slow to decline, and with recession concerns, stricter lending standards, and weaker consumer and business confidence, experts predict it will stay above Central Bank targets for most of 2023. They do expect “mild” recovery in 2024, and they're saying Ontario's inflation rate will “moderate gradually” over the next two years. But in the short term, interest rates will stay high while economic growth and the job market slow.
Soaring Population Growth Is Also Impacting The Economy
While expanding our skilled labor force and pool of taxpayers is certainly a good thing, the massive influx of new Canadians is putting huge pressure on housing and infrastructure. The impact of bringing in 500,000 immigrants a year – over 40% of whom will settle in Ontario – will ultimately depend on how effectively the government can address challenges through planning, integration programs and collaboration.
How Is Ontario's Real Estate Market Faring?
There are fewer buyers out there.
Some are in wait-and-see mode, and buyers who were qualified earlier this year have been taken out of the running with the last couple of rate hikes.
Prices have been adjusted. There's still some competition in resale, but we're not really seeing properties go for too much over asking, as a rule. Properties are sitting on the market longer and there’s more inventory out there.
There’s also less availability from the bank of mom and dad. Fewer parents are able to help their kids buy these days. With portfolios cut in half, they're hanging on to their funds. Plus, this demographic isn't moving – not even downsizing – because right now it's cheaper just to stay put. Everyone's in a holding pattern.
There's major competition for rentals. It's very difficult to find places for clients, especially in highly desirable neighbourhoods. With fewer people able to buy and more immigrants coming in, there’s huge pressure on an already under-supplied rental market.
Why Is Ontario So Heavily Impacted?
Housing plays a prominent role in driving our economic activity and growth. And that affects everything from employment to consumer spending, from wealth accumulation to the industries that surround real estate. So, unbalanced economic growth and policy challenges have a big impact. Governments can't seem to find that “magic” housing policy recipe that addresses affordability and manages supply and demand. They've made a mess of it from the top down, from federal to provincial levels. Nothing has worked.
It's Hard To Predict What Will Happen Next
There are so many unique elements that have contributed to where we are right now. And while we can look at historical trends to guide us to a certain extent, we’re really in uncharted territory here. But here’s what we do know (at least until September 6, when the Bank of Canada makes its next announcement):
- Sellers who put their homes on the market can still get a fair price, but need to be patient since properties are taking longer to sell.
- Buyers who can afford higher monthly payments, or those who don't need to get a mortgage, can find nice properties, but again, patience is key.
- While we do have more supply than we've had in the recent past, historically, inventory is still very low.
- Buyers who face affordability issues are going to have a hard time over the next couple of years, I'm sorry to say, as rates stay high and day-to-day life gets more expensive.
Whether you're a buyer or a seller, it's important to stay on top of what's happening in the market. That means working with the right agent – one who can really interpret the data and tell you what's happening. Using tools like those on condos.ca and property.ca can also help you understand the market.
The Current Market Is Impacting Agents, Too
I'm seeing more exits from the industry, and the agents who want to succeed will need to work harder than ever. Going back to basics, honing their skills, trimming expenses, bumping up their marketing, and watching, learning, and really taking the time to connect with consumers to understand their needs -- these are all more important than ever.From a RealServus point of view, having two very different real estate models under one umbrella is helping us manage the ups and downs of the market really well. The Right At Home scale model and the Property.ca Inc. focused lead generation model are allowing us to tackle two different markets – and helping us cater to all manner of agents and their clients in many different segments of the market.
This article was produced in partnership with STOREYS Custom Studio.