Toronto’s real estate market may have “woke up from its slumber” as 2023 drew to a close but the trend of higher resale activity will have to persist for several more months before it leads to a rebound in prices, a new report from RBC suggests.
The report from economists Robert Hogue and Rachel Battaglia was released this week. It shows that home sales in the GTA were up 21 per cent in December, rising from a near 15-year low in November.
But Hogue and Battaglia point out that the “end-of-year sparks did little to alter softening price trends” with a further 1.3 per cent decline in the GTA’s home price index from the previous month.
Over the last year home prices in the GTA have remained virtually unchanged with its home price index only down 0.4 per cent from this time last year, RBC says.
“We expect this softness will persist through the first half of this year with a market recovery gaining strength thereafter as interest rate cuts accumulate,” the report states. “Our view is the Bank of Canada will pivot around mid-year and slash its policy rate by 100 basis points over the second half of this year, followed by further 100 basis points in 2025. We see prices firming up after activity has turned and demand-supply conditions have tightened sufficiently—possibly sometime in the third quarter. That said, any price recovery will be restrained by lingering affordability issues.”
The average selling price of a Toronto home across all property types peaked at $1,334,062 in February 2022 before dropping to a low of $1,037,542 later that year, according to Toronto Region Real Estate Board data.
Since then prices have largely held steady other than a burst of activity last spring.
In their report, Hogue and Battaglia said that while “a combination of price concessions from sellers and modest mortgage rate declines spurred more buyers into action” into December it wasn’t enough to lift prices materially.
They also warned against “reading too much into a single month’s burst of activity.”
“The tightening in demand-supply conditions in December would need to be sustained for several more months in order for prices to change course,” they say.
Last month real estate brokerage Royal LePage released a forecast suggesting that Toronto home prices would increase by six per cent by the end of 2024.
At the time the time Royal LePage President and CEO Phil Sopher told CP24 that he believed there was a lot of “pent-up demand” in the market that could be unleased with interest rate cuts.
“I think a very small rate cut by the central bank, by the Bank of Canada, will unleash a lot of that pent-up demand that we’ve had a lot of that over the last couple of years, which, by the way, is the longest slow-down in Canadian and Ontario real estate in 25-years. Even the great recession was only 9-months, we’re going to be two-years here,” he said at the time.