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Toronto’s Real Estate Climate: Weathering Uncertainty

Real Conversations on Real Estate Market Conditions

In the swirling vortex of Toronto’s real estate market, the market conditions are subtle and sudden, affecting everyone from the first-time homebuyer to the seasoned investor. Recent shifts in market dynamics, sparked by legislative changes and economic uncertainties, are reshaping the landscape in profound ways. Our article dives deep into the heart of these changes, exploring the nuanced conversations between clients and industry insiders about the new capital gains tax implications and the surprising shift in urban migration patterns. As we unpack the complexity of these issues, we aim to provide a real-time snapshot of the current sentiments and strategies shaping the market today.

The Impact of Federal Budget Changes on Property Owners:

The topic is especially timely, given the uncertainty that pervades the market. Discussions aren’t just theoretical; they involve real interactions with stakeholders across the spectrum, from renters to investors. The recent federal budget, widely criticized as a fiasco, adds complexity. The budget introduced a reset in capital gains tax and tax exemptions, ostensibly targeting only 0.13% of the Canadian population. Labelled a tax on the wealthy, it significantly impacts a broader swath of the populace, particularly affecting the 11 million Canadians who own a second property—representing over 12 to 15% of the overall population.

Furthermore, the policy changes include a substantial reversal of capital gains exemptions for individuals who own corporations. This change affects a diverse group, including lawyers, doctors, auto mechanics, and realtors who have incorporated. The effect is profound since many self-employed individuals with corporations lack a traditional pension fund, often relying on their corporation’s assets as a primary means for retirement savings. The elimination of all capital gains exemptions for corporations represents a drastic policy shift that could have far-reaching consequences on the productive sectors of the economy. The long-term ramifications might be severe, suggesting a potentially turbulent period for those affected.

Discover More: Our in-depth video covers the real conversations shaping Toronto’s Real Estate:

Strategic Advice in Times of Financial Uncertainty:

In response to these changes, the prevailing advice from financial experts is to maintain the current course. Despite the temptations to sell investment or secondary properties in a shaky market, such as cottages or vacation properties, the recommendation is to avoid hasty decisions driven by panic. There is a consensus that significant changes in Ottawa could soon lead to reversing these tax policies, perhaps under a new government with a strong majority.

We stress the importance of consulting with a professional accountant for those concerned about how these changes might affect their financial planning. While knowledgeable, real estate agents and brokers are not equipped to provide the specialized accounting advice needed in these complex scenarios.

The urgency to adapt to these tax changes is underscored by their impending implementation date on June 25. Those needing to make adjustments have been urged to act quickly, as the window for strategic financial reorganization is closing rapidly. This time-sensitive advice is critical for anyone looking to navigate the new tax landscape effectively.

Challenges & Opportunities in the Toronto Housing Market:

In the current real estate climate, selling a tenanted property poses significant challenges. Experts strongly advise against panic selling due to potential upcoming government changes, emphasizing that such moves should never be driven by fear but rather by opportunity. This strategic advice is part of a broader discussion on selling tactics that are crucial when market dynamics are notably shifting.

Particularly in Toronto, whether to sell first or buy first has traditionally been straightforward: you buy first due to the difficulties associated with purchasing. However, as it becomes increasingly challenging to sell, this dynamic is evolving, especially given the variations in the asset class.

The decision heavily depends on factors such as price point, location, and type of asset. For instance, freeholds—often called low-rise houses—typically represent a safe investment, particularly those priced under $2 million. These properties continue attracting competitive interest, with buyers eager to ascend the property ladder and aim for acquisitions to improve their living situations.

The transition from condos to freeholds is a common trend, with buyers moving out of their first condos and into freehold properties in gentrifying, up-and-coming neighbourhoods. These areas, which are not the traditionally sought-after locales like South Riverdale, Trinity Bellwood, or Little Italy, offer new opportunities for prospective homeowners. On the other hand, the condo market, including both townhouses and condo apartments, is experiencing a slowdown. This segment requires sellers to adopt a highly strategic approach and temper their expectations concerning the urgency with which their properties will sell. In such cases, selling before purchasing another property might be prudent.

The market’s current state presents both opportunities and challenges. While it is an advantageous time for buyers, especially in the sluggish condo segment, selling is fraught with difficulties. Real estate professionals should be candid in their communications with clients, noting that selling a property in Toronto is neither glamorous nor enjoyable in most instances!

We highlight the importance of clear communication with sellers, presenting them with crucial choices: whether they prioritize a higher price or a quicker sale and which risk is more tolerable if they are both buying and selling simultaneously. This conversation often leads to a critical decision-making point where clients must choose between buying first, thus requiring immediate access to funds from their sale, or selling first, potentially leading to temporary housing solutions if a suitable new purchase isn’t immediately available.

These conversations reflect the complexities of navigating a tough market where predictions are difficult and where strategic advice, tailored to the specifics of each client’s situation, becomes invaluable. With its varying dynamics and pressures, the real estate market in Toronto requires both buyers and sellers to engage deeply with their strategies and choices, often under the guidance of experienced professionals who can steer them through these challenging decisions.

The real estate landscape is fraught with complexities, particularly when dealing with tough client conversations amidst unpredictable and uncertain market conditions. The importance of having a knowledgeable mortgage broker is emphasized, especially when clients consider buying first. This raises significant questions: What happens if the property cannot be sold on time or if strategies need to be switched, such as renting out the property instead? These financial contingencies must be thoroughly explored with a mortgage broker and possibly an accountant to safeguard against potential downsides in this fluctuating climate.

Buyers now, more than ever, are influenced by media reports and come with expectations of securing properties up to $200,000 below the listing price. This shift has made buyers choosier, and they are meticulously scrutinizing every detail of a property, thus prolonging the buying process. Whereas buyers previously might have completed purchases within weeks, the current market scarcity has extended this timeline to months due to a dearth of suitable listings.

This meticulousness has also led to a change in the behaviour and expectations of buyer agents. These agents now navigate a market where clients expect more concessions from sellers, such as necessary fixes identified during home inspections—demands uncommon in previous years. The evolving buyer expectations reshape interactions and negotiations, making the market terrain even more challenging for sellers.

The shift away from predictable market seasonality adds another layer of complexity. Traditionally, quieter times like summer may no longer provide a respite for realtors if, for instance, interest rates drop in June or July, potentially invigorating the market unexpectedly. The fading of traditional market seasonality is attributed to various external factors, including economic pressures such as inflation, the political climate, and global awareness, that profoundly affect consumer behaviour.

The challenges extend to sellers with tenanted properties, complicating their selling ability. Contrary to some misconceptions, landlords cannot simply evict tenants to facilitate a sale, often leading to a ‘cash-for-keys’ scenario. Selling a tenanted property requires the buyer to either assume the existing tenancy or navigate the complex tenant eviction process—factors that can significantly diminish the property’s appeal and value in the market.

Experts caution against hastiness in selling investment properties in this strained market, particularly tenanted ones. Patience is advised, with a perspective that the market will eventually rebound. This strategic patience is crucial for weathering the current market conditions and ensuring long-term investment health. The overarching sentiment among different demographics is exhaustion, influenced by broader societal and economic stresses, further complicating the decision-making process in real estate transactions. The current environment, challenging and fraught with nuanced difficulties, calls for expert guidance and strategic patience from buyers and sellers navigating these turbulent times.

Amidst the economic uncertainties and shifting societal tides, many Canadians, especially those residing in Toronto, are edging towards disillusionment. The city, renowned for its vibrant culture and economic opportunities, is now at the heart of discussions about deteriorating conditions and the potential exodus of its residents. This rising trend of discontent, fueled by economic pressures and a stagnant rental market, is prompting more individuals to contemplate leaving not just the city but perhaps Canada itself.

Toronto’s allure remains strong, blessed with its historical charm and modern conveniences, yet the direction in which it has been heading raises concerns. Conversations are increasingly centred around the economic viability of living in such a metropolitan hub, where the cost of living escalates. Particularly among the younger demographic, such as digital nomads and tech enthusiasts, the feasibility of a nomadic lifestyle is becoming more attractive, providing them with the flexibility to work from virtually anywhere in the world.

The rental market in Toronto illustrates a significant part of the issue. There has been a noticeable softening, with prices dropping and more properties becoming available, which indicates a decrease in demand. Many young people are moving back to their parental homes, driven by the inflation and economic uncertainty that grip the region. The rental rates, which had peaked to the extent that an individual needed an annual income of $80,000 just to afford a one-bedroom apartment downtown, are beginning to see a correction. This adjustment in the rental market is a clear sign of market exhaustion and the financial strain on residents.

Financial strategies for property acquisition are being re-evaluated in response to these challenges. For those earning around $80,000, living rent-free to save for a down payment becomes a viable option. This approach could expedite their entry into the housing market, aligning their monthly mortgage payments with what they would have paid in rent, making homeownership more accessible.

The property market itself presents a mixed bag of opportunities and setbacks. The pre-construction sector, once a booming market segment, is now seeing a stark decline. Sales volumes have plummeted to levels not seen in two decades when the city’s population was nearly half what it is today. Developers are finding it increasingly difficult to sell new projects profitably, given the high costs associated with construction in downtown areas. As a result, many are choosing to delay new projects, awaiting more favourable market conditions. This pullback is crucial for understanding the long-term implications on housing supply and future property prices in Toronto.

Furthermore, the market for resale properties offers some respite, with prices per square foot significantly lower than those seen in new constructions. This scenario presents an opportunity for investors and first-time buyers, especially those who can afford a substantial down payment. In the current high-interest rate environment, a contrarian investment approach could yield substantial returns, particularly for those willing to look beyond the immediate market sentiments and understand the fundamental long-term value of properties in central Toronto.

Real estate agents operating in this environment encounter challenges. The city, which now hosts a vastly increased number of realtors compared to two decades ago, sees intense competition among agents. The current market conditions demand that realtors work harder and enhance their value to clients through transparency, honesty, and strategic thinking. This need for a more consultative and supportive role is akin to a therapist’s, helping clients navigate their financial and emotional concerns regarding property investments.

Economic Pressures & Market Adaptations:

As the narrative of Toronto’s real estate landscape unfolds, the broader implications for its residents and potential investors are becoming increasingly complex. The city’s ability to adapt to these economic shifts and maintain its desirability as a place to live and work will be crucial in determining its future trajectory.

In the highly competitive Toronto real estate market, the evolution of how business is conducted is seen through the rise of teams dominating the market. Individual agents, who once thrived independently, now find it increasingly difficult to keep pace with teams that bring a robust combination of infrastructure, experience, and a holistic approach to client experience. This shift towards teamwork is not just a trend but a necessary adaptation in an industry characterized by unpredictability and emotional demands. Real estate is inherently a solitary profession, but in times of market volatility, the support system provided by a team becomes invaluable. Agents within these teams share goals and values, creating a collaborative environment where members can vent, share ideas, and offer emotional support to each other, which is crucial in navigating the highs and lows of the market.

As the market awaits the upcoming announcements from the Bank of Canada, there is a palpable tension about potential shifts in interest rates. Predictions suggest that the Bank’s actions in the summer could invigorate the market, yet the latter half of the year remains uncertain. Observers and professionals alike speculate that the Bank will maintain stringent measures to combat inflation, which might lead to a market that mirrors the quieter, colder conditions experienced in the latter part of 2023. Despite this, there is an undercurrent of hope that positive changes could be forthcoming.

However, faith in the Bank of Canada’s strategies is dwindling. Critics point to a track record marred by misjudgments over recent years. Key economic indicators such as GDP per capita and employment rates, particularly outside the public sector, show concerning trends. Moreover, the Bank itself has flagged the nation’s productivity levels as being at emergency low levels, signalling deeper economic issues.

Discussions among financial experts, including those from major banks like RBC, CIBC, and TD, suggest a significant adjustment in interest rates—by about 125 to 150 basis points—might be necessary. Yet, there is skepticism about whether the Bank will undertake such measures. The sentiment in the financial sector leans towards a more moderate reduction, possibly around 75 to 100 basis points, which could provide the much-needed relief and shift in sentiment that businesses and consumers are hoping for.

The current economic strategy has been described using the analogy of a clown driving a golf cart along a subway line, erratically bouncing between electrified rails. This analogy highlights the erratic approach to managing interest rates—quick rises followed by reductions that do not allow for market stability. Canada’s unique mortgage structure, with a maximum term of five years, unlike the U.S.’s 30-year terms, adds to the volatility, as frequent rate adjustments can disproportionately impact homeowners’ financial stability.

Moreover, the potential decoupling of Canada’s economic policies from the U.S. Federal Reserve poses additional risks. Any significant rate lowering could further devalue the Canadian dollar, adding an inflationary twist to an already complex economic landscape.

These dynamics define the current state of Toronto’s real estate market—a sector where strategies are continuously evolving in response to local and global economic pressures. The hope among many is that the Bank of Canada will steer the economy towards calmer waters. Still, preparations are being made for various outcomes as the market remains on edge. As the city’s real estate professionals and observers brace for the Bank’s next moves, the broader implications for the housing market and the overall economy are watched with bated breath, underscoring the critical decisions ahead.


As we stand at this crossroads, the Toronto real estate market continues to be dynamic and evolving, influenced by local policy shifts and global economic trends. The conversations highlighted in this article reflect the deep complexities and strategic thinking required to navigate these turbulent waters. For stakeholders across the spectrum, the key will be to stay informed and adaptable, seek professional advice where necessary, and always consider the long-term implications of today’s decisions. Whether dealing with selling tactics, buyer expectations, or legislative impacts, the ability to maneuver with foresight and expertise will be paramount in seizing opportunities and mitigating risks in this ever-changing real estate landscape.

Contact Fox Marin, Toronto’s downtown luxury real estate brokerage, today to learn more about the advantages of hiring a quality team!

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Kori Marin is a Toronto Broker & Managing Partner at Fox Marin Associates. For high-energy real estate aficionado Kori Marin, a well-lived life is achieved by maintaining an “all-in” attitude that realizes every last ounce of one’s full potential. This mindset has driven successful results in every aspect of her life – from her corporate sales and account management experience to her international travels to her years of fitness training and leadership – and is the hallmark of the exceptional work that she does on behalf of her clients in the residential real estate sector in downtown Toronto.