Move Smartly Toronto Area Real Estate Market Report: December 2024

The Market Now: Mixed Signals Amidst Sales Growth

Key Issue: A Look Back at Toronto’s Housing Market in 2024

Key Issue: Reviving an Old Idea to Solve Modern Housing Challenges – Land Value Tax

Monthly Stats - November 2024

WATCH NOW: Mixed Signals Amidst Sales Growth - Toronto Housing Market November 2024

Toronto's housing market in November 2024 painted a complex picture, balancing robust sales activity against lingering sluggishness due to high inventory levels. Here's a closer look at the key trends:

Strong Sales Growth but Persistent Sluggishness

House and condo sales surged year-over-year, reflecting increased buyer activity spurred by lower borrowing costs. However, the relatively high number of active listings continued to dampen market momentum. This glut of inventory is keeping market conditions less competitive despite a decline in the months of inventory (MOI), which measures the balance between supply and demand.

Moderation in Competition

The decrease in MOI from earlier in the fall has not significantly intensified competition. The percentage of homes selling over the asking price has remained stable, signaling a market where buyers still hold some negotiation power. This restrained competitiveness is contributing to longer-than-usual days on the market for many listings.

Diverging Price Trends for Houses and Condos

House and condo prices moved in opposite directions in November 2024. House prices increased by 5% year-over-year, driven by sustained demand for detached homes, particularly in Toronto’s urban areas. Condo prices declined by 4% annually as high inventory levels and cautious investor sentiment weighed on this segment. Buyers continue to have leverage, with ample options and steady price declines.

The Toronto housing market remains in flux, offering opportunities for buyers and challenges for sellers in an evolving landscape.

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By the Numbers: November 2024

The average price for a house in the Toronto area was $1,370,641 in November, up 5% from the same month last year. Last month's median house price was $1,171,000, down 3% from the same month last year.

House sales in November were up 34% over last year, while new house listings were up 4%. The number of houses available for sale at the end of the month, or active listings, was up 12% over last year.

The current balance between supply and demand is reflected in the MOI, which measures inventory relative to the number of sales each month. In November, the MOI for houses fell slightly to 3.1.

The average price for a condo in the Toronto Area was $705,036 in November, down 4% from the previous year. The median price for a condo in November was $638,888, down 2% from the previous year.

Condo sales in November were up 32% over last year, and new condo listings were up 6%. The number of active condo listings was up 19% from last year. The MOI fell to 5.

Browse detailed monthly statistics for November 2024 for the entire Toronto area market, including house, condo and regional breakdowns below.

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Toronto Resale Housing Market: A Tale of Two Halves in 2024

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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WATCH NOW: Reviving an Old Idea to Solve Modern Housing Challenges – Land Value Tax

Land Value Taxes (LVT) are far from a new concept. This idea dates back to economic giants like Adam Smith and David Ricardo. Still, its popularity surged after Henry George's seminal work, Progress and Poverty, which made a compelling case for taxing the unimproved value of land as a means to curb inequality and promote economic fairness. While LVT has seen renewed interest in modern policy discussions, recent conversations highlight some significant shortcomings in its practical implementation.

On our MoveSmartly show and podcast, I recently had the pleasure of interviewing Floyd Marinesco from Common Wealth Canada, a think tank advocating for the use of LVT to address housing challenges in Canada. Floyd shared insights into how this idea could reshape housing markets and what lessons might apply to other regions facing similar issues.

Today I’ll share three important disconnects that came to light during our discussion.

What is a Land Value Tax?

At its core, an LVT is a tax levied on the value of land itself, excluding any improvements made to it, such as buildings or infrastructure. The principle is simple: the value of land reflects societal investments—like transportation networks or zoning laws—rather than the landowner’s efforts. Proponents argue that taxing land discourages speculation, encourages productive use, and avoids penalizing development, as the tax doesn’t increase when a landowner improves the property.

But while the idea sounds promising, there are practical issues that challenge its efficacy as a tool to address housing shortages and affordability.

The Disconnect Between Builders and Buyers

One of the key arguments for LVT is its supposed ability to incentivize landowners to build more housing. By exempting improvements from taxation, advocates claim landowners will see greater financial benefit in developing their properties.

However, this argument falters when the tax dynamics are scrutinized. When builders construct owner-occupied housing—such as condos or low-rise homes—the tax benefit of excluding improvements primarily flows to the buyers, not the builders. This means developers don’t experience a significant financial incentive to build simply because improvements to land are not taxed.

Substituting Taxes Without Real Change

A second concern arises when considering how LVT might replace traditional property taxes. Take, for example, a downtown parking lot redeveloped into a 70-storey condo tower with 500 units. Under an LVT system, the tax on the land would remain the same regardless of whether it supports a parking lot or a high-rise.

From the perspective of the new condo owners, would this land-based tax be significantly different from current property taxes? Likely not. In some cases, it might even result in lower tax bills. If this is true, what have we truly accomplished by replacing one tax with another? Without meaningful shifts in tax burdens or incentives, the LVT risks becoming more of a theoretical reallocation than a transformative policy tool.

Equity Concerns and Zoning Limitations

The effectiveness of LVT is further complicated by zoning constraints. In many jurisdictions, landowners are limited to building single-family detached homes, regardless of demand or land value. This leads to inequitable outcomes. Consider a senior citizen living in a modest bungalow next to a neighbour who replaces their home with a sprawling McMansion. Both landowners pay the same tax under an LVT system because the tax is based solely on land value, not on the structures built.

This scenario raises a troubling question: is an LVT truly equitable, or does it inadvertently grant wealthier homeowners a tax break? By failing to account for disparities in how land is utilized, an LVT could disproportionately benefit those with greater means, undermining its intent to promote fairness.

Conclusion

Land Value Taxes, while grounded in a long tradition of economic thought, may not be the panacea for housing affordability that some of its advocates envision. Issues like the misalignment of incentives for builders, the potential for tax substitution without meaningful change, and inequities in zoning and land use call for a more nuanced approach. If we’re serious about tackling the housing crisis, we need to critically evaluate whether LVT addresses the core challenges—or if it risks becoming an outdated solution to a modern problem.

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Monthly Statistics

Houses

House sales (low-rise freehold detached, semi-detached, townhouse, etc.) in the Greater Toronto Area (GTA) in November 2024 were up 34% compared to the same month last year.

New house listings in November were up 4% compared to last year.

The number of houses available for sale (“active listings”) was up 12% in November compared to the same month last year.

The Months of Inventory ratio (MOI) looks at the number of homes available for sale in a given month divided by the number of homes sold in that month. It answers the following question: If no more homes came on the market for sale, how long would it take for all the existing homes on the market to sell, given the current level of demand? The higher the MOI, the cooler the market is. A balanced market (a market where prices are neither rising nor falling) is one where MOI is between four to six months. The lower the MOI, the more rapidly we would expect prices to rise.

While the current level of MOI gives us clues into how competitive the market is on-the-ground today, the direction it is moving in also gives us some clues into where the market November is heading.

The MOI for houses was unchanged at 3.1 for November.

The share of houses selling for more than the owner’s list price fell to 28% in November.

The average price for a house in November 2024 was $1,370,641, up 5% from the same month last year.

The median house price in November was $1,171,000, up 3% over last year.

The median is calculated by ordering all the sale prices in a given month and then selecting the price at the midpoint of that list such that half of all home sales are above that price and half are below that price. Economists often prefer the median price over the average because it is less sensitive to big increases in the sale of high-end or low-end homes in a given month, which can skew the average price.

Condo Statistics

Condo (condominiums, including condo apartments, condo townhouses, etc.) sales in the Toronto area in November 2024 were up 32% compared to the same month last year.