GTA Real Estate: 2024 Recap and 2025 Market Outlook
A Look Back at 2024: Shifts in the Market
The real estate landscape in 2024 saw some notable shifts compared to the previous two years. Despite economic uncertainties, the market remained relatively strong, particularly in the fourth quarter. While home prices dipped slightly year-over-year from 2023, sales volume actually saw a modest increase. Transaction activity in 2024 rose by 2.6% compared to the prior year, suggesting that buyers were leveraging their negotiating power amid evolving market conditions. However, the condo segment faced significant challenges, with both sales volume and average prices declining.
December Market Insights
Taking a closer look at December 2024, home sales declined by 35% month-over-month—an expected seasonal trend. However, compared to December 2023, sales volume increased by 14%, making it the most active December since 2021.
Although sales slowed in December compared to November, they remained higher than levels recorded in May 2024, which preceded the first interest rate cut of the year. This suggests that despite a seasonal lull, demand remained resilient. One key factor in December's market dynamics was limited inventory, as many sellers took their listings off the market for the holidays. Meanwhile, new listings rose both year-over-year, though they had been trending downward since September. This reduction in available homes, combined with improving affordability, likely caused many potential buyers to wait for the more active spring season before making a move.
Sales Volume vs. Price Growth
While transaction volumes saw a modest rise in 2024, the number of new listings grew at a faster pace. This means that despite forecasts of stronger buyer activity in early 2025, price appreciation may remain subdued. The Sales-to-New-Listings Ratio (SNLR) hovered around 71% by year-end, influenced largely by declining new listings. This metric helps explain why home prices remained relatively stable instead of experiencing a sharp rebound.
Average sale prices in 2024 saw a minor decrease from 2023 levels, despite a small uptick in transactions. New listings surged during this period, contributing to price stagnation. Several factors contributed to the lower-than-expected price growth. Sellers, still influenced by the competitive 2022 market, were hesitant to accept lower offers, opting instead to either hold firm on price or delay listing altogether. This created a market stalemate where buyers sought bargains while sellers held out for better deals—ultimately shifting market dynamics away from the trends seen in 2022 and 2023.
Market Performance by Property Type
Detached and freehold properties fared better in 2024, maintaining more stable prices compared to condos. The condominium market, however, experienced its weakest performance since 1996. A key reason for this downturn was the absence of first-time homebuyers and investors, many of whom were sidelined due to high borrowing costs. Given the anticipated interest rate cuts in 2025, buyer confidence in the condo market is expected to improve, potentially driving up both sales volume and prices by mid-year. However, this recovery will take time as the existing inventory of condos needs to be absorbed first.
The Impact of Interest Rates on Market Trends
Higher interest rates during the first half of 2024 resulted in lower home prices and sluggish sales activity. However, the latter half of the year saw market conditions improve, largely driven by the Bank of Canada's decision to lower interest rates. With additional rate cuts anticipated in 2025 and home prices still below historical peaks, buyer activity is expected to gain momentum.
A notable development occurred on January 29th, when a 25-basis-point rate cut was announced. This move has already contributed to better affordability, as reflected in the Mortgage Payment as a Percentage of Income (MPPI), which has started to decline. As a result, more buyers are likely to return to the market in the coming months.
Spring 2025: What Lies Ahead?
Spring traditionally marks a surge in market activity, with an influx of new listings and heightened buyer interest. Given the current conditions, the upcoming spring season could present opportunities not seen in years—particularly if affordability continues to improve.
Several key factors will shape the intensity of the spring market, including:
The Bank of Canada's economic forecasts, particularly its projected -6% impact from a potential trade war (should 25% generalized tariffs be imposed)
A record number of mortgage renewals at higher interest rates, affecting approximately 1.2 million borrowers in 2025, with 85% of these mortgages originally signed when rates were at or below 1%
Fluctuating confidence levels among buyers and sellers, driven by ongoing interest rate cuts and their impact on supply and demand
Potential changes in government policies that could impact job security and public spending
Rising unemployment rates, which may affect buyer confidence and purchasing power
A potential bottoming out of interest rates, which could encourage more sellers to list their homes in 2025.
Although affordability has improved, the question remains whether this trend will persist or be short-lived. With whispers of further rate cuts amid global economic uncertainties, the coming months will determine whether stability takes hold or if new challenges emerge.
According to the Canadian Real Estate Association (CREA), home sales volume is projected to rise by approximately 8-11% year-over-year in 2025. However, the biggest unknown remains pricing—will lower interest rates drive up demand to the point where prices surge once again, or will the market remain balanced?
One thing is certain—2024 marked a transition period rather than a definitive correction or recovery. While it offered glimpses of stability, many unanswered questions remain for 2025. As we step into the new year, we may very well be witnessing the calm before the next major shift in the housing market.
SOURCES:
Residential Mortgage Industry Report
Ontario Housing Market Update | WOWA.ca
Canada Housing Market: National Real Estate Update - Real Estate Investing
Toronto Housing Market | 2025 Home Prices - nesto.ca
Evaluating the potential impacts of US tariffs - Bank of Canada
