For a housing market as intractably exorbitant as Toronto’s, there is the belief that a full-on crash may be the only thing that could finally push home prices into the realm of affordability for the average person — and that may be what’s coming in the near future, say some experts.
The city has been deemed one of the most overvalued in the world, with one of the least affordable markets in the world and the most concerning housing bubble of any city, and economists predict even further cost increases for goods and services across the board, especially homes.
Amid a general cost of living crisis that started in an ongoing housing crisis, the brokers at RE/MAX are now wondering if Toronto real estate is on the precipice of a crash.
It’s a direction that it has seemed to be headed given the staggering drop in sales numbers for most of the year despite an uptick in inventory.
“As Canada’s financial capital continues to post impressive housing numbers, the talk of the town has been a real estate bubble,” a December 18 update from the brokerage reads.
“Despite a slump in sales activity, Toronto real estate prices maintained their upward trajectory… although there was a drop in demand, growing population levels and a robust Toronto economy are supporting the latest wave of home sales.”
With mortgage lending rates finally set to ease early next year, stakeholders are struggling to predict how soon it will take for demand to pick back up, and for home prices to skyrocket even higher than their perennially unaffordable levels.
RE/MAX writes that prices will likely surge, but new inventory will remain a “vital concern,” especially with the textbook demand shock spurred by record immigration.
One worry is all of the housing starts that began when lending rates were lower, materials were cheaper, and people were in a better financial position to buy, but have since been put on pause.
“With interest rates reaching their highest levels since before the global financial crisis and because monetary policy functions with a lag, there could be a slowdown coming,” the firm says of new construction in 2024.
“At the same time, with financial markets penciling rate cuts for as early as spring 2024, another residential construction boom could happen.”
This lack of surety underlines all of the company’s predictions for 2024, with the team now saying that homes in the city will be getting more expensive next year after their earlier outlooks predicted the opposite. However, they say the pace at which these increases will happen “is up for debate.”
“Whether the Toronto real estate market experiences a crash or not remains to be seen,” RE/MAX ends its latest contemplation on what is next for the market.
Some troubling indications of a potentially forthcoming crash include the fact that the few people who were actually buying homes this year offered less than asking in a world where bidding wars used to be the norm, and homes have thus been going for less after sitting on the market way longer.
More listings also being terminated due to lack of interest or even being put to power of sale when owners default on their payments, which are now not only much higher than before, but have a greater impact on people’s already dwindling wallets.
