The Bibby Group | October 2024 Newsletter

As we are in the midst of fall, the air and general sentiment towards real estate appears to be lighter than markets past. We’ve certainly experienced better conditions, but I’ve worked in much inferior markets throughout the last year. Despite the Toronto Real Estate Board’s latest Market Watch report—which I will address later—it appears many properties that have lingered for months are slowly starting to sell. Market updates in this climate are interesting because we cannot paint the state of affairs with one brush. Inconsistencies are abundant: some neighbourhoods or buildings are selling quickly or with multiple offers, while others are receiving little to no showings. Overall, the fall has been better than the summer, and spring is anticipated to be better still, as many active or committed buyers patiently yet eagerly await further interest rate reductions.

Interest rates and supply levels have dominated discussions among economists and agents alike. September proved to be a positive month, with the Bank of Canada reporting that the annual inflation rate fell to two percent in August, the lowest level in over three years. With the BoC cutting its key interest three times, some economists are bracing for potentially larger rate cuts now that inflation is back at two percent, improving our odds of recovery. For its part, the U.S. Federal Reserve delivered an oversized step for its first rate cut in four years with a 50-basis-point drop, with many believing that a cycle of additional cuts will follow. However, as we move towards the spring, U.S. domestic politics and geopolitical hotspots will be a wildcard, and nothing is guaranteed. Minor rate cuts have not immediately stimulated the market, but I can confidently say that consumer confidence is gradually improving as interest rates trend downwards.

Centrally, condominium sales prices appear to be down approximately 2% year over year, with supply up by just over 33% in the same period. This has primarily been due to new investor-dominated towers reaching completion and many discouraged investors leaving the marketplace due to lacklustre performance in recent months and years. The 2023 fall market was not a productive one, and while sales were reported by the Toronto Real Estate Board to be flat year over year centrally, our group, which focuses on end-user products, has been busier than last fall and this summer. I can feel an upswing in the market despite what the data has revealed. For instance, we’ve had three properties north of $1M sell with multiple offers in recent weeks. As most of our recent transactions have been to end-users (i.e., those planning to move into the properties they are purchasing), the investor/new construction side is noticeably dormant. We need to remember that the future supply needed to fill demand in two or three years is not being built, so we may see a situation whereby we have a significant supply shortage, with prices stabilizing and eventually rising.

The freehold sector appears to be the most robust and balanced marketplace due to its fixed supply. Generally speaking, when these buyers decide to move, the decision-making process is tied to personal reasons. The condominium side, in contrast, has always felt like more of a commodity-based market. We recently listed a home in Leslieville that saw an offer date come and go (the offer date was to ensure a family of five could better plan their lives), only to receive multiple offers once the offer date had passed, showing how cautious and delicate the marketplace truly is. The inconsistent nature of the marketplace has required both sellers and buyers to remain agile.

Meanwhile, the semi-detached market has performed relatively well since last year, as values year over year are up by 7%, and sales have increased by 23%. However, supply has increased by 21%. The detached marketplace has stabilized overall, as year-over-year values increased by approximately 1%, home sales improved by 10%, and supply, like everywhere else, is up 30%.

Quality product in the luxury sector appears unaffected, as we have seen a modest upswing in condominium transactions since Labour Day. A two-bedroom suite we had listed in the Summerhill area for $3 million sold within days of being listed, while all of our condominium listings over $2 million have benefitted from increased traffic and discussion of offers. I suspect that as many of these buyers are downsizing and their homes have retained relative value, now may be a good time in their minds to buy if market improvements are destined in the future.

For the time being, buyers are in a position of power—but for how long? We expect market conditions to improve as rates trend downwards, but as we already know, nothing is guaranteed. A discussion in the fall of 2019 about where the market would be in the spring of 2020 was unpredictable. While market conditions are improving, I am not expecting any immediate changes for the balance of this year. That said, I do hold more optimism for the year ahead. As we know from years past, the macroeconomic and geopolitical landscape will dictate plenty, especially at a time when nothing is guaranteed. For now, our best bet is to remain engaged and track progress.