Toronto Resale Housing Market: A Tale of Two Halves in 2024
As seen in the Move Smartly December 2024 Market Report - Read Full Report Here
Toronto's resale housing market in 2024 was a year marked by sharp contrasts.
The year began on a competitive note, particularly in the low-rise housing segment, where inventory levels fell below two months—a clear indicator of strong demand and limited supply. Condominiums were slightly less competitive, but still tight, with approximately three months of inventory. Buyers faced fierce bidding wars, and properties—especially in high-demand neighborhoods—were often snapped up in under a week.
However, by mid-year, the market experienced a significant shift. Demand cooled dramatically as economic uncertainty and higher borrowing costs weighed on buyers' confidence. Inventory levels surged as homes lingered on the market for weeks, even in previously red-hot areas. For the low-rise market, this shift marked a stark departure from the rapid turnover of earlier months.
The condominium (condo) market, already grappling with soft demand, was hit even harder. A record number of units flooded the market as investors, frustrated by four consecutive years of stagnant prices, sought to offload their holdings. Many investors who had once been buoyed by the prospect of consistent price appreciation found themselves recalibrating expectations amid muted demand and a challenging sales environment.
While the market did show modest signs of recovery in the final quarter, with sales volumes ticking upward, the overall tone remained sluggish. Toronto's resale housing market in 2024 reflected an evolving dynamic shaped by shifting economic forces and changing buyer sentiment.
The New Condo Market: A Year of High Completions and Hidden Risks
The new condo market in Toronto faced new challenges in 2024, as over 20,000 units were completed in a very soft resale environment, highlighting a growing issue that had been simmering under the surface — negative equity for investors. For the first time, condo units were completing at values below what investors originally paid.
In some recent condo developments, investors who purchased units at $1,500 per square foot during the pre-construction phase found themselves in a tough position when those same units were only fetching $1,200 per square foot on the resale market today. This mismatch has created a negative equity scenario, where the value of the asset is less than what investors paid.
Despite this growing problem, Canada's major banks and the Office of the Superintendent of Financial Institutions (OSFI) have adopted a controversial approach to mitigate the risk, which I’ve previously discussed here. By relying on "blanket appraisals," a method that assumes the original purchase price reflects the unit's value, they effectively ignored the declining market reality. This practice allows investors to close on their units and secure mortgages despite the disparity in market value.
This strategy, while effective in preventing immediate turmoil, raises significant concerns. It has temporarily insulated the market from major distress, ensuring that most projects remain viable and that developers avoid the financial fallout of widespread investor defaults. However, it also postpones a potential reckoning. By sweeping these issues under the rug, the new condo market risks building structural vulnerabilities that could become more pronounced if market conditions deteriorate further.
For now, the approach taken by the banks and regulators has prevented a collapse in the new condo market, but questions linger about how sustainable this strategy will be as investors grapple with their financial positions in the years ahead.
The Rental Market: Rising Supply Meets Waning Demand
Toronto's rental market in 2024 has been heavily impacted by the recent surge in new condominium completions, which flooded the market with an unprecedented number of rental units. The number of active rental listings has nearly tripled compared to typical levels, creating significant competition among landlords and putting downward pressure on rents.
Average condo rents, which peaked at just under $3,000 in August 2023, have since declined by 8%, falling to $2,761 by the end of 2024. This drop in rental income has made it increasingly challenging for investors to cover their carrying costs, particularly as mortgage rates remain elevated.
Adding to these challenges is the federal government’s decision to dramatically reduce the number of non-permanent residents in Canada—a demographic that has historically been a significant driver of demand in Toronto’s rental market. With fewer new renters entering the market, the pressure on rents is expected to persist, exacerbating the financial strain on landlords.
These dynamics have contributed to a growing wave of condo investors opting to sell their units. With rental yields declining and property values stagnating or falling, many investors are reassessing their long-term strategies. The combination of these factors signals that Toronto's rental market is undergoing a fundamental shift, one that could reshape investor expectations and tenant dynamics in the years to come.
A Market in Transition
Toronto's housing market in 2024 has been defined by significant headwinds across the resale, new condo, and rental segments. What began as a competitive and robust year for the resale market quickly turned sluggish by summer, with rising inventories and declining demand. The new condo market faced its own set of challenges, from negative equity issues to regulatory interventions aimed at averting widespread defaults. Meanwhile, the rental market grappled with an oversupply of units and a cooling demand environment, leading to falling rents and growing investor unease.
As Toronto heads into 2025, the housing market remains at a crossroads, shaped by evolving economic conditions, regulatory actions, and shifting buyer and renter behaviors. How these forces play out will determine whether the market stabilizes or faces further disruption in the months ahead.
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John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
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