A Tale of 2 Markets First Quarter 2025 Condo vs Castle (Freehold) Here's what you need to know!

Nico here providing an overview of the real estate market as it stands right now, highlighting the division between condo and freehold markets and the impact of historically low interest rates and recent interest rate changes. I also discuss the current economic situation, advising against making permanent decisions in temporary situations and encouraging people to consider all options before making a decision. Lastly, I differentiated between the freehold and condo markets, predicting that the condo market will remain soft for the next year and a half before prices increase significantly in 2026-2028.

Key Takeaways

1. Potential homebuyers to consider purchasing freehold properties now, as prices are expected to increase in the spring, summer, and fall markets of 2025.
2. Condo buyers to take advantage of the current soft market conditions over the next 1-1.5 years before prices potentially increase significantly from 2026 onwards.
3. Current condo owners to hold onto their properties and consider renting them out if not a primary residence.
4. Condo owners considering selling to wait until 2026-2028 for potentially higher prices.
5. All real estate investors to stay informed about the upcoming Bank of Canada announcement on March 12th.
6. Prospective buyers to explore opportunities in the $1.05-1.25 million range, taking advantage of the new CMHC high-ratio mortgage limits.
7. All individuals involved in real estate decisions to consult with professionals (real estate agents, mortgage brokers, financial advisors, bank managers) before making major decisions.

YouTube Video - A Tale of 2 Markets Condo vs Castle (Freehold)

Ciao ciao

Transcript

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Nico James-Bock: We're in the 3rd week of February, towards the end of the month, and there's a lot of noise about

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Nico James-Bock: what's happening in the real estate markets. What is happening in the economy? What should people do with regards to the tariff threats? What's going to happen to interest rates in this episode of building wealth, brick by brick with me, Nico James Bach, a broker at Royal Lepage signature, realty in downtown Toronto.

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Nico James-Bock: I'm going to cut through the noise, and present you with what is really happening. There are in the current climate really 2 markets. What are those markets? Well, we'll take a look. Now.

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Nico James-Bock: as I mentioned, there are really just 2 markets where it's a it's

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Nico James-Bock: a division between condo and versus castle or freehold. I like to divide those markets, because really it depends on which market you are in that will dictate your next move. And what's happening to prices in those respective markets?

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Nico James-Bock: I always say that real real estate is a long term investment. So it's

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Nico James-Bock: helpful to look at where prices are going in a month, over month or year over year basis. But it's even more important, especially in these times, to look beyond that. So to 5 years, 3 years, or 10 years, I have on the screen right now. The

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Nico James-Bock: Mls. Home price index benchmark price, which gives you a pretty good idea of where prices are headed, where prices have started at the beginning of the year, and what has changed, and it's

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Nico James-Bock: really helpful to look at where prices were 3 years ago or 5 years ago.

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Nico James-Bock: So if we look at just the Ontario market. I have some representative cities here, just for quick reference. We look in the Guelph area, and we see that in January prices in Guelph for all home types. The Hpi index composite Hpi. Is at 825,800,

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Nico James-Bock: one month ago there was a 1.2% gain. 3 months ago, 1.8% gain. 3 years ago, if you recall, we were in 2021, beginning of 2022, there was a negative 13.7% change in the prices in Guelph.

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Nico James-Bock: 5 years ago, however, there was a 42.4% increase.

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Nico James-Bock: So that gives you a pretty good idea of price change in Guelph. If you go to Hamilton Burlington, the average price is 830,900. Just one month ago there was just a point 2% gain. 3 months ago there was a minus 1% loss in price.

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Nico James-Bock: 3 years ago, again 2021 beginning of 2022,

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Nico James-Bock: minus 17.8%. Well, what happened 3 years ago? We know that there was the massive

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Nico James-Bock: increase in interest rates. So as we know as one of the 7 factors that affect price. Real estate prices is the cost of ownership. When there is such a major disruption in the cost of real estate. It's felt immediately in the sale price.

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Nico James-Bock: 5 years ago, however, in Hamilton Burlington we see a 38.5% change positive change in prices. 5 years ago we were dealing with historically low interest rates, basically getting money for free

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Nico James-Bock: Kingston and Area 576,800 is the average price, as, according to the January 2025 statistics. One month ago the Kingston area saw a loss of 0 point 7% 3 months ago, 3.3% gain.

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Nico James-Bock: As we are heading into the end of 2024, 3 years ago, around the same time that we were experiencing historically low interest rates. And then we had that incredible change in a jump in the cost of the overnight lending rate, we saw in the Kingston area a minus 3.6% change.

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Nico James-Bock: But 5 years ago, in Kingston they saw a 56.1% gain in the average price.

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Nico James-Bock: Moving to some of the more populous areas we have, we have Toronto, Toronto.

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Nico James-Bock: the greater Toronto area. The average price in January 2025 is a million, 89,300.

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Nico James-Bock: One month ago Toronto saw a normal price decrease of 0 point 1%. So nominal 3 years ago, during the peak or the start of the peak, we are at a minus 12.6% change in the price. However, 5 years ago, in the greater Toronto area

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Nico James-Bock: the average price saw a 36.9% increase

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Nico James-Bock: people. There is no other commodity other than real estate that will give you that kind of a return. However, it's important to understand that you realize those returns. The longer you are in real estate. Okay, the longer you stay in real estate the bigger the gains. It's a long term investment and well worth it. So the overall picture regarding housing

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Nico James-Bock: optimism amid challenges. That is my mantra. Despite economic concerns, including potential tariffs, lower interest rates

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Nico James-Bock: and we are in a lower interest rate. Environment are encouraging real estate activity, marking a shift from the artificially low rates of 2021 and 2022

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Nico James-Bock: tariff uncertainty and interest rates, while the Us. Trade policies under President trump create uncertainty. Potential further rate cuts by the Bank of Canada could support the real estate market by offsetting economic slowdowns. So the housing market stability is a direct result of that. The Bank of Canada's rate cuts have provided relief to homeowners, and the mortgage stress test

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Nico James-Bock: ensures stability. Remember, we are still in that stress test requirement. So people are for the most part, when they get a new mortgage, are stress tested, so they are able to handle fluctuations

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Nico James-Bock: in terms of a higher interest rate. So that's really what has protected the environment that we are in. And we're seeing, not as many defaults as we would have thought, reducing downward pressure on home prices, impact of immigration and the condo market. So the reduced temporary visas for international students, combined with high condo completions.

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Nico James-Bock: may soften condo prices, creating a buying opportunity before a future supply shortage. In between 2028, and 2031

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Nico James-Bock: market opportunities and Cmhc changes increased. Cmhc high ratio mortgage limits

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Nico James-Bock: which kicked in on December 15th of 2024, raising the ceiling from 1 million to 1.5 million. So basically, the actual ceiling before December 15.th They actually kicked in on the 1st of January, but they were announced to kick in on December 15.th

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Nico James-Bock: The ceiling was 999,900, over which you are required to put down 20%. Now that the ceiling is from 1 million to 1.5 million, with a lower down payment requirement. It opens the door to many more opportunities for buyer. The sweet spot actually is not at 1.5 million. That's just the ceiling. The sweet spot for most buyers

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Nico James-Bock: is a million, 50, a million, one, a million, 2, a million, 250. That area is really where most 1st time buyers or second time buyers are targeting. And now, with this raise in that ceiling, it opens up a lot of more possibilities.

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Nico James-Bock: So what are the key takeaways in terms of real estate. This is a tale of 2 distinct markets.

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Nico James-Bock: freehold versus condo. Most freehold markets are doing brisk business with multiple offers in some pockets and fewer days on the market. Overall prices are creeping upwards with each passing month.

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Nico James-Bock: If you want to get into a freehold property by upsizing. It's a good time to do so now, because prices will continue to increase as we head into the spring and summer markets as well as the fall market of 2025.

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Nico James-Bock: We are now in a declining interest rate, overnight, lending rate environment. Even the ten-year benchmark rate which dictates fixed mortgages. Mortgage rates

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Nico James-Bock: is hovering around the 4% mark. There are even actual cases where you can get a fixed mortgage, for like 3.9, for example, it would obviously depend on the

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Nico James-Bock: the, the home in question, as well as the credit worthiness of the applicant.

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Nico James-Bock: Prices in the condo market over the next year will remain soft.

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Nico James-Bock: Okay, and we will see slight downward price adjustments to clear out the existing inventory until 1.5 to 3 years from now, when there are no new condos coming to market. So in 2026, end of 2026, 2027, 2028,

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Nico James-Bock: and prices will go sky high.

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Nico James-Bock: Now this is backed up by a direct quote from Benjamin Tall, who is with Cibc

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Nico James-Bock: during a recent keynote address. So mark my words. This situation that we're in now with regards to the condo market is temporary.

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Nico James-Bock: The next year to year and a half is a time to get into the condo market as a buyer. If you're a condo owner, hang on to it, and, if possible, rent it out. If it's not your primary residence. Then consider selling in 2026, 2027, and especially in 2028.

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Nico James-Bock: Always keep in mind the 7 factors that determine real estate prices. We here in Canada have quite a few issues to deal with with elections. Next week the Bank of Canada announcement on March 12.th A cold end to winter

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Nico James-Bock: overall, though we are economically quite sound and heading in the right direction, there will always be elements of uncertainty, whether from the us or elsewhere, or even domestically.

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Nico James-Bock: stick to the fundamentals, and you'll see that things will work out as they always have, and we will get through this

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Nico James-Bock: if you look at the Treb average price for the 5 year period. We'll see the usual dips in the average price. In January

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Nico James-Bock: we will have the February market stats available

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Nico James-Bock: in about 3 weeks time, so we'll see. We will start to see the trend line point upwards.

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Nico James-Bock: Now is the time. If you are looking to buy either. Right? Sizing, downsizing, upsizing. Now is the time to buy, especially if you're considering economy.

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Nico James-Bock: Now is the time.

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Nico James-Bock: If you don't have to sell, then hang on.

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Nico James-Bock: Remember, do not make a permanent decision in a temporary situation. Don't panic

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Nico James-Bock: and consider making a permanent decision that you cannot back away from

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Nico James-Bock: stay positive, speak to competent and reliable professionals and make decisions based on facts. I present the facts and charts on all my social channels and also through this, podcast

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Nico James-Bock: so go through them. There's also a video version on Youtube of these podcast episodes. So you can follow along with the charts.

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Nico James-Bock: Please remember to consider all options. Consider all information. Speak to the requisite advisors, your real estate professional, your mortgage broker, your financial advisor, and your bank manager.

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Nico James-Bock: Only then will you be able to make the right decision. That is right for you.

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Nico James-Bock: That concludes this episode.

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Nico James-Bock: We will update you on the events as they unfold. Ciao Ciao.