Toronto Real Estate Market Update | December 2023

Friday Dec 15th, 2023


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2023 has come to an end and it was a challenging year for the real estate market. High borrowing costs and strict mortgage standards made last year a turbulent one, but relief may be in sight. The potential for lower borrowing costs, coupled with resilient economic factors, could spur a rebound in home sales in 2024.


Watch Alex as he breaks down the final month of the year and provides his thoughts on what we may see happen in the first half of the new year.


2024 Market Predictions

From Sean Smith of Dominion Lending



  • GTA home prices were volatile in 2023. Better balance awaits in the new year.

  • Variable Rates: Most Big Six banks predict the Bank of Canada rate to fall by at least 1% by the end of 2024. However, bond markets predict up to 1.5% rate cuts by the end of 2024.

  • Fixed mortgage rates are falling rapidly, down 1% in 30 days.

  • Housing affordability is improving as prices and interest rates fall.

  • A soft-ish economic landing is progressing in Canada. If that path continues, home prices may rise in 2024.

  • Population growth is expected to remain high in the new year, but the pace is expected to slow, especially among international students.

GTA home prices were volatile in 2023. Better balance awaits in the new year
The Greater Toronto Area's real estate market experienced significant fluctuations in home prices in 2023, heavily influenced by the Bank of Canada's rate hikes.  Building on the 400 basis points worth of rate hikes by the Bank of Canada in 2022, borrowers faced an additional three quarter-point hikes in 2023. After an initial surge in home prices over spring, prices fell once the Bank of Canada restarted rate hikes.

Big Six Banks predict the Bank of Canada rate will fall by 1% by the end of 2024
As we enter 2024, the consensus among major banks is the Bank of Canada will no longer increase rates. The focus now shifts to the timing and extent of rate reductions, with projections suggesting a minimum of 1% in cuts by year-end. National Bank stands out with its prediction of seven cuts, totalling 1.75%.

Markets Predict up to 1.5% of Rate Cuts by the End of 2024
Canadian market interest rate expectations forecast a significant shift in the Bank of Canada's rate policy, with expectations of rate reductions starting as early as March 6, 2024. This anticipated decrease from 5% to 3.5% could ease financial pressures.

Fixed Mortgage Rates are Falling Rapidly, Down 1% in 30 days
The recent rapid decline in the 5-year Canadian Bond Yield by over 30% from its peak has led to lower rates on fixed mortgages, with banks reducing most fixed rates by around 1%. That provides more budget for new buyers and some relief to those facing mortgage renewals.

Housing affordability is improving as prices and interest rates fall
Over the last two months, falling home prices and interest rates have led to better affordability in most parts of the Greater Toronto Area. Interest rates are forecasted to fall further as Inflation gradually returns to the Bank of Canada's 2% target in the second half of 2024.

A soft-ish economic landing is progressing in Canada
The unemployment rate is rising, mortgage delinquency rates, insolvencies in Ontario, and Credit card debt per household have risen slightly from their record lows. Still, borrowers have proven mainly resilient thus far.

The economy has ground to a halt over the last five months. Gross domestic product in Canada has been cumulatively negative for nearly two consecutive quarters as the unemployment rate has risen due to surging population growth.

Households are weathering the storm of higher mortgage renewal rates. By the Bank of Canada's estimation, roughly 40% of mortgage holders have already seen their mortgage renewed at a higher rate, and economists expect that to slow the economy and labour markets further over the next two quarters. In addition to a slowing economic backdrop, Inflation is also showing a downward trend amid stable commodity prices. The Bank of Canada will respond to continued economic softness with consecutive rate cuts in the second half of 2024.

If that path continues, home prices may rise in 2024
In November, the Toronto Metro Real Estate Market showed signs of stabilization, with a slight decline in new listings and a rise in sales compared to the 10-year average. Moreover, a notable surge in terminated listings, at a scale last observed in 2009, contributed to the active inventory resilience.

Short-term factors should continue to put downward pressure on home prices. Still, I expect affordability to improve by the second half of 2024 through lower prices, rates, and solid income growth. Still, affordability will remain a challenge, likely to keep any price growth modest in 2024.



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