That’s the question on everyone’s mind as the Toronto real estate market shows signs of change. However, with rising interest rates, decreased demand, and more listings, Toronto’s housing market is becoming more balanced.
Recent data from the Toronto Regional Real Estate Board (TRREB) reveals that residential property sales dropped nearly six percent in October compared to the previous year. Even on a month-over-month basis, home sales were down. Despite this decline, house prices in Toronto continued to rise. The average price increased by 3.5 percent to $1.126 million in October.
Different property categories also saw price changes. Detached properties increased by 8.2 percent, semi-detached by 4.7 percent, and townhomes by 1.1 percent, while condo apartments decreased by 1.7 percent.
TRREB President Paul Baron explains that although demand has decreased, the growing population and strong Toronto economy continue to bolster home sales. However, many potential homebuyers are turning to the rental market due to high borrowing costs and uncertainty about interest rates. When mortgage rates decrease, home sales are expected to pick up once more.
The possibility of a Toronto real estate market crash depends on several factors, including interest rates and inventory. The Bank of Canada may cut interest rates in response to slowing inflation rates, potentially causing prices to rise again. However, the pace of this increase is uncertain.
Real estate inventory is another crucial concern in Toronto market. Housing starts in Toronto have improved compared to the previous year, providing some relief. In October, housing starts increased by 30 percent, and year-to-date, they have exceeded 43,000, up 22 percent from the same period in 2022.
Although the housing construction boom has been strong, much of it was initiated when interest rates were historically low. As interest rates increase, a slowdown may occur. However, if rate cuts are implemented in the future, another residential construction boom could happen.
Supply in the Toronto real estate market has significantly improved over the past year too. New and active residential property listings have surged by 38 percent and 50 percent, respectively.
To address the issue of an overpriced real estate market, Christopher Alexander, President at RE/MAX Canada, suggests implementing a mandatory financing condition in offers, establishing an industry watchdog to review transactions with inflated prices, and increasing housing supply.
While reports suggest that real estate markets like Toronto are vulnerable to a sudden price collapse, it’s important to consider these proposals and monitor market conditions for a more accurate prediction.
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