A Year in Review
As 2024 winds down, it’s clear this year has been one of adjustment for Toronto’s real estate sector. From interest rate shifts to changing immigration policies, each quarter offered its own unique dynamics. I find that reflecting on the year offers a chance to recognize key milestones while embracing the exciting opportunities and potential that 2025 promises to bring. So, here are some of the highlights:
Rate Cuts
The defining theme of 2024 was the Bank of Canada’s pivot on interest rates. After aggressive rate hikes in preceding years, the central bank embarked on a series of cuts, bringing the key lending rate to 3.75% by October. This easing of rates, coupled with inflation hitting a low of 1.6% in the fall, injected cautious optimism into the market. Buyers, sidelined by affordability challenges, have begun to re-enter the market, and November’s sales figures show a 40% year-over-year increase. However, many remain hesitant, patiently waiting for rates to fall further or for home prices to soften.
Tempered Results
Though rate cuts historically stimulate demand, the impact was largely tempered this year. Yes, with a month to go in 2024, total sales reported through the TRREB MLS are expected to outperform last year’s 66,000 sales. But for context, the 10-year average is closer to 93,000 sales. Of course, with sales down and months of inventory rising as high as 5.13-months in September, savvy buyers recognized their opportunity to seize the day in a quieter market. Condominiums and single-family homes with higher inventory offer favourable conditions for negotiation, echoing the famous Warren Buffett adage: “Be greedy when others are fearful.”
Immigration Policy Adjustments
In contrast to monetary policy, immigration policy introduced a more complex narrative. Canada’s decision to scale back immigration targets—from 500,000 new permanent residents annually to 365,000 by 2027—marks a significant shift. This policy change, alongside a predicted decrease in the temporary population, aims to ease pressure on housing demand, particularly in the rental sector.
In 2024, vacancy rates and rental prices have begun showing signs of easing. This adjustment will not only challenge investors who bank on high rental demand and rising prices, it will further complicate the pre-construction condo sector. New condo sales, already down 85% below the 10-year average in September, now face additional headwinds as developers are forced to recalibrate expectations.
Buyers’ Market Opportunities
For buyers, 2024 offered a rare window of opportunity. Elevated months of inventory—as high as 4.8 months for single-detached and 6.9 months for condos in September—signaled a market where supply outpaced demand. Average prices, while down from pandemic highs, remained resilient, with detached homes averaging $1.45 million for 2024. Those willing to act, found themselves in a position where they could take their time and negotiate more favourable terms, a stark contrast to the hyper-competitive markets of previous years.
Of course, the year’s subdued activity was not without its nuances. Sales were down, yet certain properties moved quickly, underscoring the importance of strategic decision-making. Data revealed that nearly 17% of July’s sales occurred in less than a week, illustrating how the Toronto market remains hyper-local and that desirable listings will command attention. Our office even set a record this fall for the most expensive home ever sold on the MLS. That said, the sweet spot for sales activity remains with homes priced between $600,000 and $1,500,000, accounting for 70% of all sales. Homes priced over $2,000,000 represented less than 7% of the market in 2024.
The Impact of Policy Changes
Several regulatory adjustments also shaped the landscape this year. The removal of the stress test when switching lenders, the increase of the insured mortgage cap to $1.5 million, and the introduction of 30-year amortization periods for first-time buyers and on new builds all aim to enhance affordability. These measures, coupled with lower rates, are expected to spur increased market activity heading into 2025.
On the taxation front, Toronto’s vacant home tax rate hike to 3% sparked debate. While intended to encourage better utilization of housing stock, the policy also served as a cautionary tale for property owners. Administrative missteps—like failing to declare occupancy—proved costly, reinforcing the importance to stay on top of an ever-changing regulatory environment.
Looking Ahead to 2025
As we move into 2025, two competing forces will continue to shape Toronto’s housing market: affordability and supply. The rate cuts of 2024 are expected to gain traction, drawing more buyers off the sidelines. Yet, years of under-building—exacerbated by delayed condo projects—mean that supply challenges will persist, particularly as pent-up demand returns.
For those contemplating their next move, the lesson from 2024 is clear: timing the market perfectly is a fantasy. Rather, the focus should always remain on aligning real estate decisions with long-term goals. Whether navigating today’s opportunities or planning for tomorrow’s market shifts, one truth endures: Toronto’s real estate landscape is as dynamic as the city itself.
At Harvey Kalles Real Estate, we’ve been guiding clients through market cycles since 1957. As always, our team is here to provide the insights and strategies you need to make informed decisions in any market environment.
Heading into the holiday season, I wish you and your loved ones the very best in good health and happiness. Happy New Year.
