Sometimes, the Toronto real estate market is firmly decided. If inventory is low across the board, demand is high, and competition is expected. There are no surprises; the market is decidedly a seller’s market. Then, there are times when the market feels a little frozen—fewer than average transactions occur, selling a property takes longer, and selling prices are sluggish or even slipping. Buyers take their time finding the right place, and sellers need to be patient and understanding.

This fall feels like one of the more difficult markets to call. The Toronto real estate market is in a puzzling place right now—not only because it is unclear where the market may be heading, but also because Toronto property types are not performing the same. Even within a specific property type, like detached houses, performance varies from neighbourhood to neighbourhood and at different price points.

To get our heads around this particular fall market, let’s look back at how the rest of the year has performed so far. From January to about April, the market was strong. We emerged from a market in the fall that was fairly frozen with fewer transactions. The early part of this year started with a little more promise. There was hope that interest rates would likely go down later in the year. Remember, the Fall of 2023 had a market that had to absorb two unexpected interest rate hikes from the summer of 2023. So, the expectation that rates wouldn’t rise any further brought people back to the market.

Around April, the market started to stall. We saw some building inventory in the condo market, particularly with condo apartments downtown. Many investors, renewing their mortgages at higher interest rates, were not pleased with their new numbers and the increased cost of carrying their investments. If these “Mom and Pop” investors were having trouble with their tenants, the timeframe to have a hearing at the tenant/landlord tribunal would be 8 months to a year—a long time to go without rent. Some investors I know have told me that it is too risky to have tenants in this current environment. So, a larger reason for the increased inventory is due to more listings from investors with tenants, mostly in the condo sector.

If these investors tried to sell their units with tenants in them, it was pretty difficult. Investors were not buying investment properties in Toronto with the higher rates and additional costs. Even if a buyer was purchasing a condo unit to live in, the risk of the tenant not vacating for the new owner(s) was a risk some buyers were not willing to take, even though most tenants respectfully leave when required by law.

Then came the interest rate cuts, the event both buyers and sellers had been waiting for. Just the anticipation of interest rate cuts earlier this year was enough to get the market moving, but when the cuts actually came in June and July, the market quieted down for the summer. The cut on September 4th is far too new to see what kind of impact it will have.

So far, the three interest rate cuts have not brought a rush of buyers back to the market, though we have not given them much time in an active market.  The condo inventory has been growing larger every month, all spring and into the summer. In the condo apartment market, we may have slightly tilted into a buyer’s market downtown. That said, more buyers did come to the market in June and July because of the interest rate cuts, but not enough to balance out the growing inventory of condo apartments for sale.

So, here is what I think is going to happen this fall: First, I suspect this third interest rate cut will make the cuts feel like a continuing trend. That may encourage more buyers to come out because they will be able to afford more, and there will be some belief that rates will continue to trend downward. Just keep in mind there is a new mindset among some buyers that they should wait until rates are as low as they can go. I’m not sure this is a very smart strategy since lower rates usually lead to higher prices. Regardless, I think we should see more buyers this fall.

We will also see more sellers this fall than we did in the spring. There are sellers who have been waiting for rates to come down before listing their properties.

Houses will have a strong market for sellers. The inventory for houses has not built up as much as it has with condos, so it is still a seller’s market. Houses that are starter homes will be the most competitive. In Toronto, the market will be strongest for starter homes from $1M to about $1.7M. Above that, there will not be as much demand. Condo townhomes will sell well too.

Condo apartments have a lot of inventory. I suspect we will see more activity, but it will take the rest of the year to go through that increased inventory. So, it will still be a buyer’s market here. That said, if you have a condo that is not tenanted, you will have a much easier time selling it. No tenants will give you the edge right now, even if the tenants are great. I think it is a good time to buy a condo. You certainly have some choices, prices are dampened, and the falling rates are allowing buyers to qualify for more. Also, with so few condo starts this year, we should see a shortage of condos in the long term.

Preconstruction is the least appealing option right now. As a buyer, I don’t think most preconstruction condos currently have inflated prices, even with incentives.

Fall often acts as a market transition point. After a seasonally slow August, the market reboots in the fall. We see a lot more listings, and buyers and sellers come back to the market. Once Labour Day passes, the market starts. But this fall is a tough one to call. We may have a market that is seller-friendly in some areas and buyer-friendly in others.