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Patience the key word for 2024 real estate market recovery

New home real estate, along with several other industries, is still feeling the effects of the pandemic and interest rate increases, yet I feel strongly that we’re well on our way to recovery.

Those obstacles had major impacts on people’s lives – especially concerning homes and condos, likely their biggest financial investment.

We see a lot of cautious optimism creeping in that was not there at the end of 2023. It’s new, it’s fresh and it’s contagious. We started feeling it in resale housing, which in January racked up 37 per cent more sales than January 2023. Even the resale luxury market has experienced increased sales volume.

Although new construction got off to a slow start this year, I see that as a good thing, with condominium developers taking care before they offer sales at their buildings. Remember that massive condominium towers require hundreds of sales in order to reach their financing thresholds. That takes time.

Patience will go a long way to turning around the market this year.

Predictions are that we will see interest rates start to come down around Q3, which makes prudent optimism for this year appropriate. In fact, interest rates are now expected to fall to 4.65 per cent by the end of 2024.

This paves the way for a return to a very strong new home and condo real estate market. Even if the pick-up is gradual, my instincts tell me that new construction condos will come roaring back this year.

Plus, Canada’s inflation rate fell more than expected in January, to 2.9 per cent. 

The waiting game

Though we have not seen any condo launches so far in 2024, I can tell you that of the launches brought to the Greater Toronto Area last year, only about 10 were resounding successes. Our market perspective comes from Baker representing seven of those projects, and selling 43 per cent of the market (according to Realnet data). 

Again, patience will see this year turn around, especially as developers understand that the old ways of doing business have shifted.

Expectations used to be that if we launched a condo, we would have a huge success right away. Nowadays, selling phases will take longer.

We will see our clients launch around the end of February and in March, but sales will take a bit more time. Again, optimism is great, but patience is key.

Keep in mind that mortgage applications increased by 10 per cent in January, and unemployment is down to 5.7 per cent, with 37,000 jobs created during the month. Rental supply is tight with low occupancies, and rents keep going up.

These are all positive signs that we are making our way down the road to recovery. Yes, there is a lot going on in the world that may affect us. For example, if the U.S. stalls on bringing down its interest rates, we will feel that in Canada and may need some time to react. 

Optimism with a dose of reality

So, how are we handling all of this at Baker?

First, we are setting realistic expectations with our developers. We remain optimistic and realistic. At the end of the day, investors who purchase today will wait four to six years to take ownership. That is a lot of time for equity to grow.

And let’s face it: immigration is at historic highs, which is expected to continue. This year alone, the federal government plans to welcome 485,000 new permanent residents, and another 500,000 in 2025.

The fact is that Canada is attracting people because of our peaceful democratic society, along with world-class amenities and a high quality of life.

Our cities, especially Toronto, are gaining international prominence. Toronto is one of the most livable, competitive and diverse cities in the world, receiving impressive international rankings every year.

More than half of our city’s population is made up of residents born outside of Canada (more than 230 nationalities represented). In addition, more than 190 languages are spoken here. It is easy to understand why Toronto is so attractive to residents and start-up businesses. 

In the 30+ years I have been in the industry, we have encountered several different kinds of markets. When you are in a low cycle, it may seem like it will go on forever. Then one day, it’s over and it is like it hardly happened.

Many of our clients are now primed and ready for a market renewal and have asked us to start working on plans.

When we see the first downturn in interest rates, we can look forward to a volley of construction launches. There is a remarkable level of pent-up demand out there, and we have a pipeline poised and ready to move on satisfying that need!

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