Ontario’s Housing Market Outlook for 2024

Ontario’s Housing Market Outlook for 2024

Forecasts anticipate sluggish sales unless there’s a significant drop in mortgage rates or sellers reduce prices.

In certain regions of Ontario, 2023 saw home sales plummet to levels not witnessed in two decades. Many industry experts are skeptical about mortgage rates decreasing sufficiently in early 2024 to spur potential homebuyers into action.

Ontario’s home sales in 2023 reached lows reminiscent of the early 2000s. With little indication of substantial mortgage rate reductions on the horizon, forecasts suggest this subdued market activity will persist into early 2024.

Although prices have moderated from their pandemic-induced peaks, high-interest rates combined with buyers holding out for further price reductions have led to a sluggish market across the province.

The Greater Toronto Area (GTA) is poised to see its lowest annual home sales since 2001, even with today’s population being approximately 25% larger than it was back then.

Recent data reveals a nearly 13% year-over-year decline in Ontario home sales, characterized by the Canadian Real Estate Association as a significant downturn.

Anticipating Continued Sales Stagnation

Experts generally agree that the housing market will remain subdued in early 2024 unless mortgage rates decrease substantially or sellers become more flexible with pricing. There are concerns that mortgage rates won’t decline quickly or significantly enough to motivate hesitant buyers in the early part of the year.

The housing market seems to be in a state of ‘hibernation,’ marked by reduced sales, listings, and stable prices. Sellers have yet to adjust their asking prices sufficiently to offset the higher borrowing costs faced by buyers, resulting in many potential buyers staying on the sidelines.

Slowing New Home Construction

Premier Doug Ford’s government is in its third year of a 10-year plan to construct 1.5 million new homes in Ontario, falling short of the necessary annual pace.

While final 2023 figures are pending, new construction rates as of November were lagging behind the previous year’s 96,000 housing starts.

Forecasts suggest an even slower construction pace this year due to challenges in project financing, inflated building material costs, and ongoing labor shortages.

Additionally, data indicates that approximately 30 of Ontario’s largest municipalities won’t qualify for a share of the government’s $1.2 billion Building Faster Fund in 2024 due to insufficient housing starts in 2023.

Condominium Market Challenges

The condominium segment appears most vulnerable in Ontario’s 2024 housing market, partly due to a significant number of units being investor-owned. As these mortgages come up for renewal, affordability issues are expected to arise.

A new report reveals that over half of GTA condo investors are experiencing financial losses on their properties.

Year-to-date, new condo sales have declined by 47%, with potential buyers being priced out of the GTA market.

By the end of November 2023, the Toronto Region Real Estate Board reported a 44% drop in condo sales compared to the same period in 2021.

Sales of new condos in the GTA seem to have suffered an even steeper decline, down by 47% year-over-year, according to a November report by research firm Urbanation.