The lingering effects of COVID-19 continue to influence global economies and housing markets. Although market shifts have always been unpredictable, certain observable trends should be weighed carefully when deciding whether 2024 is a good year to build your custom home in Toronto.
Below we highlight key trends and insights to help you make an informed decision. We are also going to walk you through a brief checklist to help you decide whether or not you are ready to invest in a custom home.
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Housing Market Conditions in Canada
Before you start looking for a custom home builder, it’s important to first evaluate the housing market conditions and whether or not 2024 is a good year to build your dream house. Here are the highlights:
- 2023 was supposed to be a year of recession but was marked by a period of moderation in home prices. At the end of 2023, inflation was 3.1%.
- In 2024, national home prices are expected to experience modest quarterly gains in the first half with more substantial increases in the latter part of the year. This projection follows the potential initiation of interest rate cuts by the Bank of Canada.
- According to the Canadian Real Estate Association (CREA), the national average home price in October 2023 reached $656,625, reflecting a 1.8% rise from the previous year. Major cities such as Toronto and Vancouver observed more significant gains, while cities like Calgary experienced notable growth in popularity.
- Real estate investors suggest 2024 may be the best year for buyers, especially first-time homebuyers, as interest rates are not expected to return to early 2020s lows.
Overall, 2024 looks promising and should be the best in the last five years to purchase a property in Canada. Moreover, 2024 is expected to be a buyer’s market that offers reduced competition, fewer bidding wars, and increased flexibility for buyers to include conditions in their offers, such as home inspections or financing.
Luxury Homes Market Shows Resilience
According to Sotheby’s State of Luxury Report, the Greater Toronto Area (GTA) surged by 32% year-over-year in July and August, with 74 properties sold, three of which exceeded $10 million. However, the annual gain dropped to 3% in September, with 31 properties sold, and no sales exceeding $10 million.
If you’re considering leaving Toronto, you should know that in Vancouver, luxury home sales experienced a 96% year-over-year increase in July and August but noted a decline of 29% in September, with only 15 properties sold. The summer’s heightened activity, driven by pent-up demand for single-family homes, is giving way to a more cautious approach, with buyers navigating challenges like elevated mortgage rates and home prices.
Record-setting population growth in major Canadian cities will play a crucial role in stabilizing demand for both conventional and luxury housing in the short term. Despite challenges, Toronto remains a robust luxury market, while Calgary is expected to excel in high-end single-family home sales in 2023. Vancouver and Montreal’s luxury markets face a delicate balance as buyers reassess options in an evolving housing climate. Despite geopolitical challenges, local demand and supply dynamics are anticipated to be the key influencers in the fall housing market.
Construction Costs: Labor Remains a Challenge
In Canada’s construction industry, material prices, particularly lumber, have found stability after past volatility. Although lumber constitutes around 5% of home construction costs, persistent supply and demand pressures persist. While custom projects typically split costs evenly between labor and materials, an emerging trend sees labor costs increasing faster than materials, possibly shifting the ratio to 55% labor and 45% materials.
The scarcity of skilled tradespeople, however, continues to be seen as a challenge, demanding increased workforce entry incentivized by higher wages. Considering these dynamics, the current period might be a more cost-effective time for construction than the future.
Is Now the Right Time to Build Your Dream House?
Considering the dynamics in the wider Toronto economy, specifically the luxury housing market, the most important question for a prospective homeowner is “Is it the right time for me to build my custom home?” Your answer depends on the following:
Financial Situation
Investing in a custom home is one thing but having the confidence and financial means to do it is another. That’s why it’s important to establish the stability of your current financial situation and whether you can maintain it as such in the foreseeable future.
Long-Term Goals
Opting for a custom home allows you to imprint your distinct style on a residence tailored to your unique needs. If the market lacks a home aligning with your vision, constructing a custom home becomes a prudent choice.
Location Commitment
Generally, if you foresee a lasting connection to your current area, building a custom home is a wise move. If the General Toronto Area is your chosen home, your preferences lean towards custom amenities, and most importantly, your resources align, there is no time like the present to invest in your future.
Selecting the Right Building Partner
While building a custom home promises an extraordinary outcome, your journey’s satisfaction relies significantly on your chosen partner. Finding a local builder whose vision aligns with yours is a unique opportunity that shouldn’t be overlooked.
