Economist reacts to Toronto real estate figures – BNN Bloomberg

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Toronto’s latest real estate figures suggest the housing market may be in the midst of a rebound, according a Desjardins economist, though he cautions that the full impact of elevated rates has yet to play out.

New data from the Toronto Regional Real Estate Board shows the city saw 3,444 home sales in December, an 11.5-per-cent climb compared to a year ago. The average price for a home climbed 3.2 per cent to $1,084,692.


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Marc Desormeaux, principal economist at Desjardins, said he believes the numbers show Toronto’s real estate market may be on the upswing, as the Bank of Canada appears to have paused its rate hiking cycle.

“We are seeing some signs that perhaps the worst of the drag from the second round of monetary tightening is behind us in Toronto, but we’ll wait to see what happens in the spring real estate season,” he told BNN Bloomberg in a television interview on Thursday.

“We haven’t yet seen the full impacts of higher rates on the broader Canadian economy.”

New listings declined in the month, with 3,886 in December compared to 4,161 a year ago. Desormeaux suggested the generally high number of listings shows Toronto homeowners are struggling to keep up with the high interest rates.

“For folks who bought a home in 2019 or 2020 at ultra-low rates, if they’re on a fixed five-year term, then they’re going to be renewing at much higher rates in the next few years,” he said.

“We see a situation in which a much larger share of Canadians’ income goes to the service of mortgage debt. That means there’s less money available for other types of consumer spending.”

RATE OUTLOOK

Desormeaux predicted some relief on the horizon in the form of rate cuts. He expects the Bank of Canada will start cutting interest rates in the middle of 2024, with its trendsetting rate coming down to around 3.5 per cent by the end of the year.

“It’s important to note that we’re not anticipating that we’re going back to ultra low rates, below one per cent on the overnight rate per instance,” he said.

“That means the mortgage renewal question will be a big one for the Canadian economy over the next few years.” 

The Bank of Canada’s next rate announcement is scheduled for Jan. 24.

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