Benjamin Tal and Michele Romanow

Top T.O. banker predicts lower interest rates and market recovery for 2024

After a year of constantly rising interest rates and a market that has flooded with new listings without many sales to make a dent, from renters to homeowners, everyone is looking for relief in 2024. We caught up with top CIBC economist Benjamin Tal for his thoughts on the year ahead and what we can expect from Toronto’s housing market. 

We’re apparently in a buyer’s market right now. Will that change?

The way I put it is it’s a buyer’s market with no buyers. But this is a temporary pause or slowing. By the second half of the year, we’ll start to see very clear signs that the market is starting to recover. There’s a lot of pent up demand in the market. Interest rates will start to fall. I think people will see the light by spring of 2024. 

Looking a few years out, what do you predict?

If you look at the situation two or three years from now, when the demand is back, the supply will not be there. Looking at pre-sale activity in the condo space, we are not making anything new that will be available two or three years from now. So the demand will be there but the supply will not be. You don’t have to be an economist to predict what will happen. So I predict the market will be tight two or three years from now, but in between there will be a soft period in which the market will adjust.

The market has been pretty rough in Toronto. Are you saying it’s going to be worse in the near future?

The short answer is yes.  The government is now trying to boost the supply of rental apartment buildings, and that’s very good. The waiving of HST on rental housing builds is a very welcome change. But it all takes time. There are all kinds of initiatives, but I think three years from now, the market will still be very tight. 

What does the beginning of 2024 have in store for us?

The first quarter of 2024 will be a challenging quarter. Interest rates will remain relatively high, demand is slowing, supply in terms of relisting is a problem, and we may see some distressed sales in the market. We’ll see more supply than before, which will have a negative impact on prices. And the first quarter will be challenging for the condo market in particular.

Why the condo market?

The issue is investors. As interest rates remain elevated in the first quarter of the year, investors will not be buying the way they usually do, and in fact, they might be selling. As for supply, new constructions are still going on, so supply is rising, but demand is slowing. 

Where do you predict interest rates will bottom out?

Today, the overnight rate is 5 per cent, so by the end of 2024, it will likely be at 3.5 per cent. 

For people struggling right now with mortgage payments, should they try to wait it out?

Timing is very tricky. I think that if you need to sell, you have to sell. But the likelihood is that the market will be relatively subdued over the next few months and then will start improving. 

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