Interest rate cuts, mortgage rule changes could speed up GTA housing market in 2025, experts say
Realtors expect a buyer's market for condos, especially smaller units
Interest rate cuts and changes to Canada's mortgage rules could set the stage for change in the Greater Toronto Area's real estate market this year, experts say.
Last year the federal government expanded eligibility for 30-year mortgage amortizations to all first-time homebuyers and all purchasers of new builds and also increased the $1 million price cap for insured mortgages to $1.5 million.
That means buyers can purchase a $1.5 million home with less than 20 per cent down.
Real estate broker Andrew Ipekian says these changes to the mortgage rules could get more buyers out in the spring.
He says he expects the market for homes priced between $1 to $1.5 million "is going to be really robust for 2025."
Another factor that may help the market is interest rate cuts.
The Bank of Canada lowered its interest rate by 50-basis points to 3.25 per cent in December, marking the fifth consecutive reduction since June.
That's compared to five per cent at this time last year.
Ipekian says those cuts haven't made big waves in the market yet, but that might change heading into the new year.
"It takes time for dust to settle and for people to realize what their purchasing power is going to be," he said.
After a sluggish 2024, Royal LePage broker Shawn Zigelstein says he expects 2025 could see more activity from buyers who weren't able to enter the market before.
"People are now able to afford things a little bit more with interest rates dropping, new mortgage rules in place," he said.
"I think what we're going to start to see is a little bit of pent up demand."
However, Zigelstein says he doesn't expect a repeat of the bidding wars frenzy of the pandemic.
"Those expectations can't be there anymore. The market has come back down to earth."
'Sluggish' market for micro-condos
The outlook also depends on the type of housing.
When it comes to condos, Zigelstein says he thinks the market is oversaturated due to a surplus of inventory.
"There's a lot of condominiums that are out there that are very well priced and unfortunately just aren't getting the buyers in there."
John Pasalis, president of real-estate brokerage Realosophy, said sales for small, micro-units are "unbelievable sluggish right now" which may give buyers some negotiating power.
"Those units, we have a ton of inventory not a lot of people buying them because they fall into the category where they're a little too small for people to live in, to want to own or occupy them, and investors aren't buying them," he said.
There is also some good news for renters, who make up nearly half of Toronto households.
Canadian rental prices were down 1.2 per cent in October 2024 compared to the same time last year, marking the first time that annual rents have declined since July 2021, according to a report from Rentals.ca and real estate data firm Urbanation.
In Ontario, rental prices were down 6.4 per cent year-over-year, the report said.
Pasalis says he expects that trend to continue into 2025, especially with the federal government's immigration policy changes.
"If you have the number of non-permanent residents in Canada in decline, that effectively puts downward pressure on demand during a period where we have a lot of rental inventory in the pipeline," he said.
With files from Talia Ricci