The Bibby Group | April 2024 Newsletter

Newsletter
April 18, 2024

Slow yet steady—that’s how I would characterize Toronto’s real estate market over the last month. While many sellers yearn for markets of years past, i.e., explosive growth and reactive price increases, consistent yet effective efforts generally make us all better off in the long term versus the erratic nature and instability we have experienced over the last four years. Renewed optimism has ramped up the number of transactions in Toronto’s resale market throughout March, and this is an excellent start to getting back on track for a healthy and balanced marketplace. Let’s break down the highlights of the Toronto Real Estate Board’s latest Market Watch report.

The condominium market has experienced its busiest month for transactions in quite some time—likely since June 2023. Month-over-month transactions increased by 16.5%, although month-over-month and year-over-year prices were flat. The concern many industry insiders and consumers have expressed is that supply levels are higher than normal, which is true (up 15.7% month over month and 55.3% year over year). However, what comprises the majority of this supply? It’s primarily one-bedroom rental units that have come up for mortgage renewals or have experienced declining rental values due to increasing competition.

If you remove, let’s say, the vast majority of 500 sq ft one-bedroom suites in densely populated areas flooded with high-rise towers, I would argue that current quality inventory levels are low to moderate. Indeed, many of our active end-user condominium buyers searching between the $800K to $1.8M range (who will move into these spaces) are waiting for appealing supply to surface. So, while it appears there is plenty to choose from, this is not the case across the board. Sales in the luxury sector, meanwhile, appear to be subdued, as I am finding the $2M+ price range controlled at the moment.

The single-family freehold market has experienced restored confidence after a turbulent finale to 2023. As our housing market has always worked with a relatively fixed supply for years (we are not building new subdivisions in Toronto), the number of detached home transactions month over month increased by 42%, which is encouraging, while semi-detached home sales increased by 9.8%. Values for both appear to be relatively flat month over month, which again shows a willingness for buyers to transact in a disciplined manner.

So, who is out there buying? End users, first-time buyers with parental assistance, urban professionals, young families and empty nesters who can now successfully sell their homes for higher prices than the fall market. Based on what I’m seeing, investors have taken a step back; only when interest rates decline, rents increase, or investor suites begin depreciating (which they will) will their marketplace improve.

The Bank of Canada’s most recent decision to hold the benchmark interest rate steady has provided continued confidence to the marketplace as well as optimism that rate cuts are on the horizon. As all segments appear to be recovering and conditions improve, buyers will continue keeping a close eye on their financing. As mentioned previously, most of the active buyers at the moment are quite reserved and showing discipline and are likely to walk from a transaction if the purchase price does not align with their budgets. For the month ahead, I see more of the same: consistency and a willingness to transact in a predictable nature. This is a good thing, in my view—slow and steady wins the race and will always produce better long-term results.

All My Best,
Christopher Bibby