Market Overview: The Bank of Canada’s Rate Cut and Its Impact

With the Bank of Canada recently reducing its key lending rate to 4.25%, the GTA real estate market is poised for some recovery. The rate cut boosts consumer confidence, leading to increased mortgage pre-approvals. While some political uncertainty looms with talk of a fall election, real estate professionals expect the market to strengthen as buyers and sellers gain confidence.

Condo Market: Oversupply and High Borrowing Costs

A combination of high borrowing costs and record condo completions has led to an oversupply in the GTA condo market. According to TD economist Rishi Sondhi, GTA condo resales dropped by 25% compared to pre-pandemic levels. With 19,000 condo completions between January and July 2024, an influx of supply is further driving down prices.

•Active condo listings increased by 63.9% year-over-year.

•Condo prices have fallen 2% across the GTA and are expected to decline by mid-to-high single digits into early 2025.

•Investors, burdened by high borrowing costs and declining rents, are offloading properties, further contributing to the supply glut.

Millennial Wealth Surge: Real Estate’s Role

Millennials have seen their wealth surge by 144% since the pandemic, driven largely by real estate investments. The average net worth of millennial households is now around $491,296. This wealth increase is due in part to record-low interest rates in 2021, which helped many millennials enter the housing market. However, the generational wealth gap remains wide, with baby boomers holding much more wealth overall.

•Real estate holdings shot up 122% for millennials, far outpacing the 45% growth seen across all generations.

•The role of intergenerational transfers (financial gifts) has been a major factor in helping millennials break into the housing market despite rising costs.

The Downsview Lands Transformation: A Game-Changer for Northern Toronto

The $22 billion transformation of the Downsview Airport lands is a massive opportunity for northern Toronto. Over the next 30 years, the id8 Downsview project will redevelop 528 acres into residential, commercial, and green spaces, including housing for 55,000 people.

•Downsview West District: 8,000 residential units, with 20% affordable housing and 6,400 jobs.

•Arbo District: 4,000 units, also blending residential and commercial uses with a focus on green infrastructure.

•The project will inject economic growth into the area, benefiting from its proximity to Yorkdale Mall and transit hubs.

Homebuyers and Sellers Face a Rocky Fall

Real estate professionals are anticipating a strong fall market, but political uncertainty and ongoing inflation pressures could make for a bumpy road. The market is seeing signs of recovery, particularly in luxury properties, though the condo segment continues to struggle.

•Luxury property sales have increased, particularly in high-value neighborhoods like The Beaches, where median prices have risen 15.7% year-over-year.

•However, condo investors are facing challenges, especially those who purchased units at preconstruction prices. Many are offloading condos at reduced prices, reflecting overall caution in the segment.

Summary and Predictions

The Toronto real estate market is experiencing a period of adjustment. With rate cuts, the market is set to improve, though challenges like condo oversupply and political uncertainty remain. As millennials continue to grow their wealth through real estate, expect to see more activity, especially as the Downsview development rolls out in the coming years.

Key Predictions:

•Condo prices are expected to continue falling through early 2025, while other segments may stabilize sooner.

•Millennials will continue to shape the market, particularly as intergenerational wealth transfers increase.

•Political developments may add uncertainty, but expect the market to remain resilient into 2025.