Despite a quiet period, conditions are right for certain buyer cohorts
Activity in the Toronto housing and mortgage markets dipped in June compared with the same time last year despite the Bank of Canada’s interest rate cut at the beginning of the month – but there are still certain buyer types eking out opportunity in the city.
Sales were down 16.4% in the Greater Toronto Area (GTA) on a year-over-year basis, according to the Toronto Regional Real Estate Board (TRREB), although a flood of new inventory came as a welcome sign for those prospective buyers who are ready to take the plunge.
A total of 17,964 new listings arrived in the GTA market in June, marking a surge of 12.3% over the same month in 2023 as Toronto’s acute supply tightness showed further signs of easing.
Grace (Yuhong) Bi (pictured top), principal broker at Verico Fortune Effect Financial Group in Toronto, highlighted the growing portion of buyers purchasing homes for their own use, with the prominence of investor buyers continuing to diminish.
That’s been a welcome development for the market, she said. “In the few years past, we used to have a lot of people buying for investment properties or rent [purposes],” Bi told Canadian Mortgage Professional. “But now I see more people – pretty much 90% and above – buying for their own use.
“I think that’s good and healthy, and this is what we want to see. We want more people who don’t own a house but are able to afford a house… get into the market. For investors right now it’s very quiet. It’s not very affordable, because the cash flow is not good.”
While investment is currently difficult from a mortgage underwriting perspective, Bi said recent changes to Canada’s capital gains inclusion rate – an increase from 50% to 66.67% on gains over $250,000 for individuals – had also spooked some investor buyers.
Sales of newly built condos in Canada's largest city fell by 57% compared to last year, with only 3,159 transactions recorded in the first half of 2024, according to a recent report by Urbanation.
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 22, 2024
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All eyes on the Bank of Canada ahead of July decision
The Bank of Canada’s 25-basis-point rate cut at the beginning of June may not have been enough to move many prospective buyers off the sidelines, but Bi said plenty of clients appear to be looking ahead with interest to its announcement tomorrow (July 24) to see whether another reduction is on the way.
Cooling inflation and a labour market slowdown have fuelled hopes of a second successive cut, one Bi said would come as welcome news for buyers – especially those hoping to buy their first home.
New entrants to the market appear to be becoming more active, while Bi also noted a growing trend of owners preparing to upgrade their homes. “Previously, they were more hesitant to sell their house,” she said. “They felt the market was not so good, that selling was hard. Which was true.
“But I do see people are more motivated to start selling. That’s why there’s more supply, and I do see that giving people a bit more hope in the market.”
Of course, affordability remains a huge challenge for many first-time Toronto buyers, with even the prospect of a fall in interest rates unlikely to materially improve the outlook on the downpayment front.
A sizeable number of first-time buyers are taking advantage of gifted downpayments from family members if they’re able to, Bi said, although a condo market that’s been flooded with new supply is presenting some opportunities for homebuyers who aren’t able to avail of outside support.
How are other Canadian markets faring?
The muted performance of Toronto’s housing market in June was mirrored elsewhere across the country, as the Bank of Canada cut helped inject some life but “came well short of electrifying activity,” according to an analysis by the Royal Bank of Canada (RBC).
The banking giant’s assistant chief economist Robert Hogue said in a report that the national housing market continued to operate at a clip 9% below its pre-pandemic pace even despite an uptick in activity in June, as a modest increase in sales failed to offset the impact of month-over-month declines earlier in the year.
The jump in inventory witnessed in Toronto was also seen in other major markets, with Vancouver’s new listings increasing by 8.4% compared with the previous month and the Fraser Valley experiencing a 12.1% bump. That meant new listings were up sequentially for the fifth time in six months, Hogue pointed out.
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