2024 may shape up to be a wild ride in the Toronto real estate market, but it could also continue on a subdued path as last year. Will we achieve the goal of a soft landing or will we pound into the sand? Nobody knows and only time will tell. Well, BOC’s cautious but deliberate moves on interest rates have become a beacon for policymakers, homeowners, and renters alike.
With Governor Tiff Macklem's latest pronouncements, the nation finds itself at a crossroads, navigating the delicate balance between stifling inflation, largely of the government's own making, and fostering economic growth. The Bank's recent stance suggests a growing confidence that the current interest rates have reached a sufficiently restrictive plateau to rein in inflation without further hikes. The current pause on rate hikes, now held steady at 5%, offers a glimmer of hope. Yet, the Governor's words create uneasiness: the Bank remains vigilant, ready to tighten the reins should inflation unexpectedly surge.
Amid these monetary policy deliberations, the specter of housing inflation and soaring living costs looms large. The CMHC reports that an eye-popping 20% of renter have fallen behind on rent. With one in five tenant households in arrears, the narrative extends beyond statistics to real-life struggles of Canadians wrestling with soaring living costs. Though I am curious to know how many renters are leveraging and abusing the skewed landlord-tenant laws, versus those who truly cannot afford their rents, that’s worth study. The crux of the matter lies not in monetary policy alone but in a structural supply shortage that has tightened its grip on the housing market.
The Bank of Canada's call to arms for all levels of government to bolster home construction is a clarion call for collaborative action. As Macklem puts it, solving the housing puzzle requires a multifaceted approach that transcends interest rate adjustments, aiming instead at a sustainable increase in supply to meet the relentless demand. This relentless demand is of course driven largely by unprecedented and unsustainable immigration levels, and curently.held.to.be required as given, as if ordained by God. They are not and beg a national debate on how much is too much for current infrastructure capacities, not to mention cultural cohesion and shared understandings.
As we chart the course through 2024, the path is fraught with uncertainty. The balancing act of maintaining restrictive monetary policy while nurturing economic recovery is akin to navigating through a narrow strait. With ghosts and goblins haunting the path.
Housing prices are inversely correlated with interest rates, and though they were held steady at 5 percent, they are projected to lower to at least 4 percent or lower by the end of the year with declining inflation.
My wild guess is that we've accrued radical pent-up demand with buyers on the sidelines for a year and ready to pounce. I abhor the idea of being perceived as salesy but I think the time to buy is now before interest rates drop and prices surge higher. If you can afford the higher mortgage rates for the next couple of years, it may be a prudent move to be bold, and buy now.