Move Smartly Toronto Area Real Estate Market Report: November 2024

The Market Now: Toronto’s Housing Market Turns a Corner as Sales Surge

Key Issue: Canada’s New Condo Sales Hangover

Key Issue: How Canada’s Immigration Cuts Will Impact Housing

Monthly Stats - October 2024

WATCH NOW: Is Toronto's Housing Market Turning a Corner?

After six sluggish months, Toronto’s housing market finally turned a corner as sales surged 45% year over year for low-rise homes and 32% for condominiums in October.

It’s worth noting that the strong growth in sales is partly a function of the fact that sales volumes last year were close to 20-year lows.

But more important than the increase in sales is that sales grew faster than new listings, which means that inventory levels are falling. When the months of inventory falls, it’s a signal that sales are outpacing new listings and that the market is gradually heating up - which is exactly what happened in October for houses and condos.

What’s behind this market rebound? While lower rates are a factor, I believe the bigger factor is that today’s buyers anticipate that the housing market will be busy in the spring due to even lower rates and the federal government’s changes to insured mortgages. They’re jumping in today to take advantage of what is still a relatively sluggish market.

While sales are up significantly over last year, and the market is gradually heating up, it’s important to note that the market is still quite slow. It’s like the market was moving at a slow 20 km/h in September, and increased speed to 30 km/h. Yes, we have picked up speed, but we’re still moving slowly.

But the anxiety many potential home buyers are feeling right now is quite high. Virtually every buyer my team and I have met with over the past month is extremely anxious that if they don’t buy a home now, they’re not going to be able to afford one in the spring market when they believe prices are going to surge.

Even though we advise them that most experts are not expecting prices to increase rapidly in the new year, buyers are reluctant to sit around and wait. Many paused their home search at the start of COVID when CMHC predicted home prices would fall. These buyers sat on the sidelines and watched home prices surge out of reach.

Many are tired of waiting and tired of putting their family’s housing needs on hold, hoping that maybe housing will become more affordable in the future.

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By the Numbers: October 2024

The average price for a house in the Toronto area was $1,362,505 in October, unchanged from the same month last year. Last month's median house price was $1,154,000, down 2% from the same month last year.

House sales in October were up 45% over last year, while new house listings were up 2%. The number of houses available for sale at the end of the month, or active listings, was up 27% 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 October, the MOI for houses fell to 3.1.

The average price for a condo in the Toronto Area was $713,546 in October, down 2% from the previous year. The median price for a condo in October was $640,000, down 4% from the previous year.

Condo sales in October were up 32% over last year, and new condo listings were up 4%. The number of active condo listings was up 20% from last year. The MOI fell to 5.

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

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WATCH NOW: Canada’s New Condo Sales Hangover

Pre-construction condo sales are falling off a cliff and will likely remain near historic lows for quite some time.

As housing experts scramble to explain why pre-construction condo sales have crashed and what needs to be done to drive more sales, they have zeroed in on one thing - the taxes and fees levied on new home sales and developers are now the reason nobody can afford to buy a new condo, according to this clamour.

And there is some truth to that. Municipalities eager to get a bigger piece of the housing boom have significantly increased development charges while federal and provincial governments have not adjusted the GST/HST rebate despite surging home prices. Every level of government should lower the taxes on new housing.

But taxes on new housing are not a new phenomenon. The same pundits blaming high taxes for the lack of new condo sales today were not very concerned about taxes when investors lined up to pay any price for a pre-construction condo in 2021.

The fact is that for years, Toronto’s pre-construction condo market has been driven by investors. When a housing market is disproportionately driven by investors rather than end-users, it always runs the risk that, at some point, irrational exuberance will take over. When that happens, house prices grow rapidly as investors are willing to pay almost any price for a condo because they believe prices will keep going up forever.

This is what happened in Toronto. No rational buyer will pay $1M for a 600 square foot pre-construction condo when they can buy an existing unit of the same size and quality for $700,000. And yet, this is exactly what pre-construction investors were doing.

Pre-construction sales aren’t tanking because of high taxes. They are tanking because, for years, prices were fueled by irrational exuberance rather than fundamentals pushing prices to a level that rational buyers are unwilling to pay. Now that the bubble has burst, Toronto is experiencing what typically happens after a bubble bursts - new home sales plummet.

This doesn’t mean governments shouldn’t lower taxes on new homes. They should! But pretending high taxes are the cause for the lack of new condo sales today is highly misleading.

For years, most housing experts advocated for a housing market driven by investors, which means they also tacitly advocated for what Toronto got - a speculative condo bubble. I say that because it doesn’t matter which bubble expert you read, Shiller, Kindleberger or Mackay, bubbles are fueled by the exuberance of investors, not the housing needs of moms and dads with strollers.

And now that the bubble has burst, instead of revisiting their misguided advocacy that put the financial interest of investors ahead of the needs of end users, which helped to fuel the bubble - they are blaming taxes for high condo prices.

This doesn’t mean governments shouldn’t lower taxes on new homes. They should! But pretending high taxes are the cause for the lack of new condo sales today is highly misleading.

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Last month Canada’s federal government announced that they would be reducing their immigration targets from 500,000 to 395,000 in 2025. This follows an announcement earlier this year that they planned to reduce the number of non-permanent residents in Canada from 7% of the population to 5% by 2026.

What impact will these changes in Canada’s immigration policies have on Canada’s housing market?

A much bigger impact than most might think.

Canada’s population is growing by roughly 1.3M people per year and this time next year. If our federal government actually follows through with their plans, our population growth might be zero a year from now - that is, no growth at all.

Even though Canada will be welcoming 395,000 new immigrants next year, the number of non-permanent residents in Canada will be declining by a similar amount resulting in little to no overall growth.

One of the big drivers of Canada’s surging house prices and rents is that for years our population was growing too quickly for the roughly 200K new homes Canada builds each year, a supply number that has largely remained flat for years.

But if Canada’s population growth falls to zero, we will suddenly find ourselves in a situation where housing completions are outpacing the demand for new housing, which should put downward pressure on rents and possibly home prices in the near term.

How is this possible when we have a housing shortage?

Canada’s housing shortage is reflected in today’s prices. What impacts tomorrow’s prices is the relationship between the change in the supply of homes and the change in the new demand for homes.

If our federal government follows through with their proposed immigration plans, Canada will be building more homes than we need to address the new demand for housing, which should reduce our housing shortage and make housing more affordable in the near term.

In addition to making housing more affordable, I expect this change to take away some of the exuberance and obsession Canadians have when it comes to investing in real estate.

It is easy to be a real estate investor when our government decides to triple our population growth, knowing that the housing supply cannot keep up. It’s an investment that is rigged to pay off.

But when our population isn’t growing, and house and rent prices are not appreciating by 10%/yr, real estate might go back to looking like a very boring investment.

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Monthly Statistics

Houses

House sales (low-rise freehold detached, semi-detached, townhouse, etc.) in the Greater Toronto Area (GTA) in October 2024 were up 45% compared to the same month last year.

New house listings in October were up 2% compared to last year.

The number of houses available for sale (“active listings”) was up 14% in October 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 October is heading.

The MOI for houses fell to 3.1 for October.

The share of houses selling for more than the owner’s list price fell to 30% in October.

The average price for a house in October 2024 was $1,362,505, unchanged from the same month last year.

The median house price in October was $1,154,000, down 2% 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.

Condos

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

New condo listings were up 4% in October over last year.

The number of condos available for sale at the end of the month, or active listings, was up 20% over last year.

Condo months of inventory decreased to 5 MOI in October.

The share of condos selling for over the asking price was unchanged in October.

The average price of a condo in October was $713,546, down 2% from last year. The median price was $640,000, down 4% from last year.

Regional Trends

Houses

Sales were up by over 40% across all five regions, with Halton seeing a 72% increase in sales. Average prices were down 6% in Durham but up in the other four regions. Months of inventory were lower than last year in all regions.

Condos

Condo sales were up in all five regions with Durham Halton and Peel seeing the biggest increase in sales. Average prices were flat in York but down in the other four regions. New listings were up by double digits in Durham, Halton and Peel and down slightly in Toronto. The MOI was down across all five regions when compared to last year.