Inventory accumulates as the effects of the rate hikes that began last year take hold of this market. While slow, it’s certainly not dead and the proof is in the solds! This month we’ve listed ~ 10 or so properties and 90% of them have sold. You may be asking, why are these properties selling while most of the Toronto Real Estate market sits? The answer probably won’t surprise you. It’s the same top-tier service we’ve always offered. Free staging, impeccable styling, outstanding photography, appropriate pricing and expert negotiations. That’s it! In previous years, these services would have likely garnered your property extra funds above and beyond market value in a bidding war. Today, it’s the difference between selling or sitting.
Read why the CMHC is predicting prices to climb 89% by 2030 and the entire market update here.
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Inventory Accumulates In The Toronto Real Estate Market
Whether that’s homes or condos, we’re all in the same position and that’s increasing inventory. The last two quarter point rate hikes put a cold water on the activity and the increase that we had seen over spring. This caused people to give pause because they were once again uncertain about how high interest rates would go. That was exacerbated by the summer months being typically slower with things not being as busy. During those summer months inventory accumulated.
Despite The BOC Holding Rates, They Actually Went Up
While the Bank of Canada decided not to raise rates in September interest rates have actually gone up – fixed rates specifically and of course, they are higher than they were a few months ago.
Typical Influx of Fall Listings Further Exacerbates Inventory Accumulation
In addition to accumulation of listings that are already apparent, the fall market in Toronto is usually the hottest, Torontonians (and many realtors) are typically conditioned to wait for fall to list. Expecting a more favourable market than summer, and second only to the spring market. However, with the added inventory and the continued sort of pause and wait and see approach by many buyers, we are seeing properties take longer to sell – across the board – as inventory accumulates.
My Advice For Sellers
I’m always ALWAYS an advocate of making sure your property stands out on the market and is presented in its best light (that’s why we offer free staging when you list with our team). But right now, it’s more critical than ever. Competition among sellers is high and buyers have the ability to be choosier than ever. You have to make sure your property looks good, that your pricing is on point and that you’ve had open and honest conversations with your Realtor so that you’ve set your expectations accordingly.
Investors are Bleeding Cash
Simply put, current rates do not make it viable to continue to rent out your property. The cash flow loss on an average property taking possession this year …. Approximately 24,000 per year at current rates. That is a tough pill to swallow for anyone, no matter their financial situation.
Predictions Going into 2024
I think we’re in for a rocky six months as people are hit with interest rates – not to mention they are once again threatening another rate hike. As the effects of the last year begin to take hold and filter through the economy we are going to continue to see a lot of owners with multiple properties sell off their second homes or investment properties. Investors are selling off many of their rental properties, even our seasoned investors with 5-10 investment properties are freeing up capital.
Rental Predictions For The Toronto Real Estate Market
This investor ‘sell off’ is something to watch. Investors feed the rental market and as they continue to sell, it will further deplete the rental supply and in rapid fashion. We’ve already begun to see rental prices climb along with the landlord’s mortgage payment, but expect it to get worse as inventory continues to deplete. You’re going to see more and more rentals go above-asking with bidding wars, cash or additional months of rent given up front. This will only continue to drive up rental rates.
Pre-Construction Sales Are At All Time Lows
The fact that the market is so slow means that we are not selling pre construction homes, which means we can’t build the housing that we need for our city – a city that already has an inventory shortage – this is going to lead to record low housing starts (brand new housing hitting the market) creating a massive depletion of inventory in four to five years. Of course, lack of inventory but plenty of buyers means… increasing prices. Expect that to be the next major boom in Toronto Real Estate.
CMHC Reports Prices To Increase 89% By 2030
This report went a little viral the other week. The CMHC who tracks housing starts and affordability has noted (albeit exactly what we said a year ago) that housing starts are at an all time low. They put out their predictions for 2030 and the numbers might shock you! House prices, while predicted to fall short-term, are expected to jump up 89% by 2030… you read that correctly, 89% or approximately 14% per year.
Why Are Our Listings Selling?
The market may be slow, but it’s certainly not dead. Listings are taking longer to sell, but they are still moving. This month we’ve listed ~ 10 or so properties and 90% of them have sold. You may be asking, why are these properties selling while most of the market sits? The answer probably won’t surprise you. It’s the same top-tier service we’ve always offered. Free staging, impeccable styling, outstanding photography, appropriate pricing and expert negotiations. That’s it! In previous years, these services would have likely garnered your property extra funds above market value in a bidding war. Today, it’s the difference between selling or not.
VIEW ALL OF OUR TORONTO REAL ESTATE LISTINGS HERE
My Final Thoughts
I think the market is still moving for amazing properties that are priced well and show great but this isn’t a frothy market and I think the next few months are going to be a bumpy road ahead for sellers and hopefully, I think by spring of next year, we’re going to start seeing our first rate hike drops.
Pierre Carapetian
Pierre Carapetian is the Broker Of Record for Pierre Carapetian Group Realty with over 12 years of experience in the real estate market. As a proud Torontonian and real estate broker, he prides himself on knowing this city inside out. He started investing at the age of 18 and has facilitated over half a billion dollars in real estate transactions.
