We are just entering the second month of 2025, but it already feels like a wild roller coaster ride.
Especially the past 10 days, just too dramatic.
First, the Bank of Canada cut the interest rate again by another 25 basis points on January 29, bringing the overnight rate down to 3%.
That should have been great news for the market, lower carrying costs for investors and lower mortgage rates for home buyers.
But before anyone could celebrate, here comes Donald Trump.
On February 1, he announced a 25% tariff on Canadian goods, effective on February 4.
Two days later, he agreed to postpone the tariffs for 30 days to March 4.
Of course, this brings economic uncertainty and potential ripple effects across jobs, inflation and real estate.
Suddenly, any market outlook and forecast could just become irrelevant.
No one really knows what's going to happen next.
Still, the Toronto Real Estate Board just released the official January statistics and their outlook for 2025.
Let me share them with you.
I will also share my thoughts on how the trade war may impact the market.
In January, the market got more active compared to December, sales were up 15%.
But if we compare the number with January 2024, sales were down almost 8%.
In terms of prices, they are still more or less flat compared to a year ago.
Let’s break things down into different housing types and areas.
Detached sales in the 416, up 3.8%.
Down 11.4% in the 905.
Average prices are more or less flat in both areas.
Townhouse sales were up 15.7% in the 416 and down 8.3% in the 905.
Townhouses in the City of Toronto actually saw an average price increase of 5.1%.
Condos.
Sales activities were down 14.5% in the 416 and 7.4% in the 905.
Condos in the City of Toronto saw an average price drop of 2.4%, with the 905 staying more or less flat.
I would say there are no surprises in these numbers.
The market is still kind of sluggish, with end users being the main buyers.
Good thing the decreasing rates are helping to reduce carrying costs for homeowners.
I have been on variable rates.
My rates were high up at 7.1% before and now they have come down to around 5%.
Declining rates is a big reason why we haven’t seen too many desperate sellers on the market, which is helping to maintain prices at the current level.
Let’s talk about the 2025 forecast by the Toronto Real Estate Board.
They foresee a growing number of homebuyers will take advantage of lower borrowing costs as we move towards the spring market.
They predict that sales will be up by 12.4% in the year of 2025 compared to 2024.
The average selling price would reach $1.147 million dollars, up by 2.6% over 2024, for all home types combined.
Price growth is expected to be stronger in the low rise homes as compared to the well-supplied condo market.
But they also added that the positive impact of lower mortgage rates could be reduced, at least temporarily, by the negative impact of trade disruptions on the economy and consumer confidence.
Yes, I agree that the trade war would have somewhat of a negative impact on the market, but I don’t think it will cause any drastic changes in the current market.
The majority of the current buyers, I would say at least 90% are end users, with minimal investors.
And among the end users, roughly 40% are first time buyers.
Here’s the thing.
End users, especially first time buyers are much less sensitive to political changes like the trade war compared to investors for 4 key reasons.
#1 Purpose
End users are buying for necessity, not speculation.
They need a place to live and their decision is driven by life circumstances, getting married, having kids, relocating for work etc.
Investors, on the other hand, are looking for financial returns, so they will pause or sell if economic conditions look uncertain.
#2 Economic Uncertainty
Investors react strongly to economic uncertainties.
They see them as risks because their primary concerns are property appreciation, rental demand and mortgage costs.
End users are generally more focused on affordability and mortgage rates, which are influenced more by Bank of Canada policies than by trade disputes.
In fact, we might see much bigger rate cuts if the tariffs really come into play.
#3 Government Measures
The government provides incentives and rebates to support first time buyers.
They have also changed the mortgage rules to allow longer amortization periods and smaller down payments.
Investors, however, are often targeted by cooling measures such as higher taxes, bans and stricter mortgage rules.
#4 Market Sentiment
Trade wars and political tensions create uncertainty, which makes investors nervous about buying or selling properties.
End users, however, are less concerned with short-term price fluctuations because they typically plan to stay in their home for many years.
So end users tend to be less reactive to political instability.
Given that our current market is mostly driven by end users, I don’t think it will get much worse because of the trade war.
But, it won’t get much better either.
I see it staying sluggish with prices flat for the next few months to come.
If you really need to sell your property in the current market, I can tell you what’s a realistic price to get it sold.
You can fill in the form at the link below to get started.
I will of course keep you posted on how the market reacts over the next few weeks, if you want to stay on top of the market, make sure you subscribe and hit the bell now.
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