Available supply spiked in the GTA last month
While homebuying activity across the Greater Toronto Area (GTA) market has remained subdued during the summer to date, a flood of new listings is giving plenty of choice to those buyers who are ready to make their move.
June saw the number of new listings in the GTA jump by 12.3% compared with the same month last year, with 17,964 properties hitting the market as sales slumped from the highs of 12 months prior.
That uptick spells further good news for buyers after the Bank of Canada’s decision in early June to slash its benchmark interest rate by 25 basis points, a move that’s not expected to be the last time rates drop in 2024.
Writing in a recent analysis for Royal Bank of Canada (RBC), assistant chief economist Robert Hogue highlighted Toronto as one of the most notable markets for improving supply alongside Vancouver and the Fraser Valley.
Right at Home Realty president John Lusink (pictured top) noted that the company’s own brand statistics had shown listings at a five-year high, up “significantly” over both last year and 2022.
That’s been accompanied by declining prices – but not across the board. “That is very neighbourhood-specific,” he told Canadian Mortgage Professional. “One has to be very careful about generalizing that that’s happening everywhere, but nonetheless we’re seeing some price declines.”
The Canadian real estate market continues its struggle with a modest 1.9% year-over-year rise in home prices, as per the Royal LePage House Price Survey. Despite Bank of Canada's recent rate cuts, market activity did not surge as anticipated. https://t.co/vl1jaPoUaa
— Canadian Mortgage Professional Magazine (@CMPmagazine) July 11, 2024
How concerning are the fortunes of the GTA condo market?
A dip in condo sales and prices grabbed headlines across the GTA last month, with a big uptick in listings of those property types helping improve the overall inventory outlook.
TRREB’s statistics showed a year-over-year drop of more than 10,000 in the number of condos being sold last month, accompanied by a drop of 1.4% (to $712,719) in the average sale price of a GTA condo.
That trend has “gotten everybody a little bit more worried,” Lusink said, as the prospect grows of a glut of condos arriving on the market with meeker demand. “Condo listings have surged by 21% year over year – and the months of inventory, more importantly, are 5.8 months,” he pointed out. “So that’s certainly a segment of the business that is more worrying than most.”
Is affordability improving for GTA buyers?
The affordability picture is improving marginally for Torontonians amid that jump in supply, although it remains one of the country’s most notorious housing markets where homebuying prospects are concerned.
In its latest measure on housing affordability, Ratehub.ca signalled a slight drop in the income required to purchase an average Toronto home, with that figure slipping by $1,250 between April and May.
Based on then-current mortgage rates, that still meant buyers required an average income of $215,920 to buy in the GTA, the company said – a figure well out of reach of most living in the region.
Lusink said that while the Bank of Canada’s recent decision to lower interest rates could have an important psychological impact on would-be homebuyers, it likely wouldn’t be enough on its own to move the needle substantially on the GTA housing market.
Further moves by the central bank are necessary, he added, for the outlook to improve. “I would say that unless we see additional rate cuts that translate into mortgage rates coming down, we’re not going to see much movement,” he said.
“That said, the inflation results, poor employment reports, cooling wages, small business delinquencies – those things are suggesting that we’ll see rate cuts at every next Bank of Canada meeting [this year]. Whether that happens is, of course, another question.”
For now, the fortunes of the condo market are something to be closely watched in the coming weeks and months, Lusink said, especially as buildings that have been under construction near completion. “A lot of the investor buyers have got their units pre-listed, trying to assign the contract. So we’ll see how that plays out,” he noted.
“Condo listings are certainly at their peak – so that could have an impact, and we’re continuing to see bankruptcies in the building sector. I think that’s an area where the impact could filter through more than people might expect.”
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