The Toronto real estate market has been on a rollercoaster ride, experiencing a volcanic start to the year with rapidly increasing interest rates. However, recent trends indicate that the market is cooling down, with more buyers hitting the pause button and new listings outpacing sales. In this installment of Ani’s real estate roundup, we will explore the current state of the Toronto real estate market and discuss strategies for buyers and sellers to navigate these changing dynamics.
A turning point in the market
The Toronto market has turned a corner as we move into the summer and head towards fall. Buyers are showing caution, leading to a relatively slower market. New listings are on the rise, surpassing sales figures, indicating a shift in the balance between supply and demand. Historically, turning points often occur after bank rate hikes, and this time is no exception. However, bidding wars are still prevalent on certain properties, suggesting that the market does not entirely lack competition.
Interest rate hikes add a thrilling twist to the market! The stress test has pushed mortgage rates to nearly eight percent, leading to a slight softening in sale prices. For buyers, this means a potential opportunity to snag a home at a slightly lower price. On the other hand, sellers need to be strategic and set competitive asking prices to stand out in a market that is becoming more sensitive to pricing.
Meanwhile, the rental market is on a wild ride of its own, fueled by Canada’s immigration policies. With a surge in newcomers, rental demand is soaring, pushing rents up by a staggering 20 percent annually. As the construction industry races to catch up with the growing demand for housing, landlords can expect an exciting journey in the rental market.
An uncertain future
The cooling effect on the market results from the recent interest rate hikes, but how long this slowdown will last remains uncertain. Some experts believe it could resolve by the fall, while others anticipate a more prolonged cooling period lasting several years. Currently, homes available for sale are outnumbering the sales, indicating a potential shift in market dynamics.
In this evolving market, both buyers and sellers need to adapt their strategies. Sellers should be prepared for a different landscape where underpricing may no longer yield the same results. It’s time to adjust your approach and set competitive asking prices to capture the attention of potential buyers.
Buyers, too, must stay alert and nimble. Rising interest rates can impact affordability, so conducting a thorough financial analysis is essential before investing. The key is to be prepared to seize opportunities when they arise and make calculated decisions that align with your long-term goals.
The rental market is currently highly competitive. Demand remains strong, making it a thrilling time for landlords seeking attractive rental yields. As the market adapts to the cooling effect, rental prices may stabilize, offering some relief to tenants.
However, investors with variable mortgages need to prepare for potential twists ahead. The next 6 to 12 months may see more homes hitting the market as some investors adjust their portfolios to accommodate rising rates. This could be a golden opportunity for savvy buyers to uncover hidden gems among the new listings.
Canada’s housing market outlook
The rebound in Canada’s housing market has moderated, with home resales increasing only marginally in June after a strong surge in April and May. Supply is gradually increasing, outpacing sales for the second consecutive month. However, the scarcity of options continues to favor sellers, and home values are still appreciating rapidly.
The Toronto real estate market is currently experiencing a cooling period, driven by rising interest rates and increased inventory. Buyers and sellers alike must adjust their strategies to navigate this changing landscape successfully. While the future remains uncertain, all stakeholders need to remain informed and make well-informed decisions based on the evolving market dynamics.
I’m excited to receive your feedback on the latest installment of my column. Your thoughts, questions, or any suggestions you have are truly valuable to me. Feel free to drop me a line at anirighthome@gmail.com.