What lower prices and Bank of Canada's rate cuts mean for Toronto housing market
Home prices in the Greater Toronto Area (GTA) fell slightly in August 2024, offering potential opportunities for homebuyers following the Bank of Canada’s recent interest rate cut.
The average selling price in the region dipped 0.8% compared to August 2023, settling at $1,074,425, according to new data from the Toronto Regional Real Estate Board (TRREB).
TRREB also reported 4,975 home sales in August, down 5.3% year-over-year. However, on a seasonally adjusted basis, sales increased slightly from July.
“The Bank of Canada’s rate cut announced on September 4 will lead to a further improvement in affordability, especially for those using variable rate mortgages,” said TRREB president Jennifer Pearce. “First-time buyers are especially sensitive to changes in borrowing costs. As mortgage rates continue to trend lower this year and next, we should experience an uptick in first-time buying activity, including in the condo market.”
Meanwhile, new listings rose by 1.5% compared to last year, reaching 12,547.
This rise in listings has contributed to a well-supplied housing market, though it hasn’t led to significant price drops, with the MLS Home Price Index Composite benchmark down by 4.6% from a year earlier.
Jason Mercer, TRREB’s chief market analyst, explained that the mix of home types sold, particularly the increase in detached home sales, has influenced the average price. He also emphasized the potential for moderate price growth despite growing demand.
“As borrowing costs trend lower over the next year-and-a-half, home buyers will initially benefit from both lower monthly mortgage payments and lower home prices,” Mercer said. “Even as demand picks up, especially in 2025, it will take time for the inventory of listings to be absorbed. Ample choice in the market will help keep price growth moderate, at least in the initial phases of recovery.”
For buyers currently on the fence, the recent dip in home prices, combined with the lower borrowing costs, could provide an opportunity to enter the market. Leah Zlatkin, licensed mortgage broker and expert at LowestRates.ca, suggested that those considering a home purchase should weigh their options now, before demand picks up again.
“Though the overnight rate would have to decrease significantly more before variable rates are competitive compared to a fixed-rate mortgage, it could be worth it for homebuyers in the long run to get into the housing market now before demand picks up in 2025,” Zlatkin said.
“Average home prices are down by 0.8% compared to August 2023, and the Bank of Canada has cut interest rates three times this year – while suggesting more cuts are coming. This gives Canadian buyers the confidence to purchase a home as the balance is now tipping in their favour.”
Read next: Three rate cuts later: Can lower interest rates reignite the housing market?
TRREB chief executive officer John DiMichele urged a focus on increasing housing supply.
“Today’s elevated listing inventory will ultimately recede. We need to maintain a sustained focus on boosting home construction, especially as it relates to producing the right mix of home types to meet consumers’ needs. This new housing also has to be affordable,” he said, noting that municipalities could play a role in lowering development charges to improve affordability.
“If people can’t find affordable housing in the GTA or surrounding Greater Golden Horseshoe, they will move elsewhere, and not necessarily to other parts of Ontario or Canada,” added DiMichele. “Housing is a key driver of our region’s economic development.”
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