Happy New Year. I hope that the start of 2024 finds you rested, in a positive mindset, and ready to take on any challenges you’ve set for yourself.
Looking back, the year in real estate was not without its own challenges. Certainly, sustained upward pressure on lending rates, fueled by the Bank of Canada’s ongoing fight against inflation, grabbed most of the attention. But let’s not forget, the year also began with important policy changes that included a federal two-year moratorium on foreign purchasers and a new Vacant Home Tax in Toronto.
With that in mind, January 2024 feels much like January 2023, with some important new regulations that will impact the industry. Some things to look out for this year include changes to the Trust in Real Estate Services Act, 2002 (TRESA), which came into effect in December. Also, as of January 1st, there is an increase to both Toronto’s Vacant Home Tax and Toronto’s Land Transfer Tax on homes selling over $3,000,000.
However, where I think January 2024 differs is in the outlook for the year ahead. 2023 began with a lot of uncertainty around lending rates, inflation, housing supply, and affordability. Ultimately, the high costs of borrowing and sticky housing prices saw transactions drop to their lowest levels since the year 2000.
This year, the road ahead appears a little clearer. Interest rates have leveled off, and we are not anticipating more increases by the Bank. The 5-year fixed rate on insured-mortgages fell below 5% in December, its lowest level since May. Inflation has slowed dramatically, decreasing to 3% at November’s end, compared to over 7% a year earlier. And despite the substantial reduction in inflation, the economy did not slip into recession. The significance of this cannot be overstated.
Despite the drop in sales volume in 2023, the average selling price for the year was down only 5.4%. The Home Price Index, which measures inflation in the market, was down less than 0.5% in 2023 for the entire TRREB region. So, with more stable rates, a relatively steady economy, and a rising population, we are not anticipating significant movement in housing prices, which should spur more buyers and sellers to transact after a year of waiting on the sidelines.
Of course, housing affordability will always remain top of mind. If you are a buyer or seller, pay close attention to where the activity is. In 2023, over 70% of MLS sales took place between $600,000 and $1.5M, while fewer than 7% of all transactions were over $2M. This statistic should offer important clarity to guide your behaviour and expectations. For example, if you are a buyer with a budget of $1M, you may be competing in a multiple offer situation, depending on the product category. If you are a seller of a $3M residence, your home may take some time to sell, and you should be prepared to carefully consider all offers.
At Harvey Kalles Real Estate, we are excited about the year ahead and are looking forward to supporting you with all your real estate needs. As always, I would encourage anyone reading this to reach out to me at (416) 723-2383, or to contact a member of our sales team. We have been in business since 1957 and bring a wealth of experience to the real estate market.
