Interest rate cuts and rising inventory aren't enough to spark GTA buyer interest
New home sales in the Greater Toronto Area (GTA) remained low in September, despite recent interest rate cuts by the Bank of Canada, according to a report released by the Building Industry and Land Development Association (BILD).
BILD reported 591 new home sales last month, down 69% from the same period last year. Of the homes sold in September, 344 were single-family units (including detached, linked, semi-detached houses, and townhouses), a 41% year-over-year drop.
“GTA new home sales had another slow month in September 2024, despite three successive Bank of Canada rate cuts,” said Edward Jegg, research manager with Altus Group, BILD’s new home market insights provider.
The central bank has been gradually reducing its policy interest rate since June, cutting it from 5% to the current rate of 3.75%.
Jegg said that current market conditions – with elevated inventory, softened prices, and recent rate cuts – are setting the stage for a buyer-friendly environment.
“We now have a market that is highly primed with elevated inventories, falling prices and a further 50 basis point rate cut,” Jegg said. “All that is needed is for buyers to jump off the sidelines.”
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Total new home inventory in the GTA has edged up, reaching nearly 22,000 units. This includes close to 17,500 condominium units and nearly 4,500 single-family homes, reflecting a combined inventory of 13.8 months based on average sales over the past 12 months.
The report indicated that this sustained inventory level, hovering around the 20,000-unit mark since last autumn, pointed to a “stagnated market” with slow sales and few new housing starts.
BILD also cautioned that prolonged low sales activity could impact housing starts in the GTA, potentially creating an inventory shortage and driving up prices in the future.
“The longer sales remain low, the longer the future negative impact on housing starts in the GTA, which will set the region up for inventory shortages and price appreciation in the future,” the report read. “The groundwork for a future supply crunch is being laid out today.”
Amid the elevated inventory, benchmark prices for new homes dipped slightly in September. The benchmark price for a new condo was $1.025 million, down 1% year-over-year, while the benchmark for single-family homes decreased to $1.565 million, a marginal drop of 0.1%.
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