Another Bank of Canada (BOC) interest rate cut in July has done little to increase sales. A softening economy and higher unemployment have curbed buyers’ enthusiasm and kept them from entering GTA’s real estate market in July. Most of the GTA is in a balanced or buyer’s market, surprisingly even in the low-rise segment.
The market in July
Inventory supply remained stable in all areas of the GTA in July, only increasing by 3 percent from the previous month. Sales (demand) tumbled by an average of 18% across the GTA compared to June, leading to a change from a balanced market to a buyer’s market in many regions. Freehold properties were mostly in a balanced market in the GTA. Multiple offers for this market segment still happen but they are rare. Condos are in a buyer’s market territory, take longer to sell, and have to be well-priced and presented to receive any interest.
The absorption rate or months of inventory (M.O.I. for short) is deemed the most accurate way to pinpoint whether a market is in favour of sellers or buyers. Found by comparing home sales versus how many listings are currently on the market, M.O.I. essentially asks the question: How long would it take for every single property to sell if no new homes were put up for sale?
Low-rise (detached, semis & townhouses)
The detached market in the GTA came to a standstill in July. Most of the GTA was in a balanced market in July with some areas experiencing a buyer’s market with moderate downward pressure on prices. Dufferin Region (2.6 M.O.I.) Durham Region (2.8 M.O.I.),. & Toronto (3.4 M.O.I.) were in a balanced market without any movement on prices. Some detached properties in these areas are receiving multiple offers but this is an exception and not the rule. York Region (4.9 M.O.I.), Peel Region (5.0 M.O.I.), and Simcoe Region (6.0 M.O.I.) were in a buyer’s market with moderate downward pressure on prices. Many properties that are listed do not sell at all, the ones that do are well-priced and nicely presented. Buyers who are currently shopping have the upper hand in this market segment. They can be picky with what they want and have leverage in most negotiations.
Semi-detached homes, as usual, fared better mostly due to their relative affordability. The absorption rate for semis in the GTA was around 2.5 months of inventory indicating a balanced or slight seller’s market in this segment. Freehold townhouses were in a balanced market in July with absorption rates hovering around 3 to 4 months of inventory without any significant pressure on prices and multiple offers being rare. In many areas, freehold townhouses have reached prices that are comparable to those of semis. With buyers having a bigger selection, most are choosing to go for a semi-detached.
Condo apartments
Condo apartments were in a buyer’s market in July, with slight downward pressure on prices.
As indicated by the months of inventory report, York Region (6.1 M.O.I.), Toronto (6.1 M.O.I.), and Peel Region (5.3 M.O.I.), are all in a buyer’s market with slight to moderate downward pressure on prices. Condos have to be priced and presented well to have a chance to sell. Multiple offers are extremely rare in this segment. Condo townhouses were in a balanced market across the GTA with absorption rates in the 4 M.O.I. range. There was little to no movement in prices for condo towns.
New home sales in the GTA are at a low point
The pre-sale condo market this year has been very weak. It’s gotten to the point that developers are not building at this point. Whatever you see in terms of construction are projects that were sold years ago. Year-to-date figures are falling to less than half of the record-low levels we saw in 2023 as per BILD (Building Industry and Land Development Association). CMHC reported a whopping 37% decrease in multi-unit starts compared to last year in Toronto. This decline was not isolated to Toronto, other regions in Canada experienced similar declines.
Two or three years from now there could be a supply shortage in the condo market. Interest rates will be lower, demand should return and there won’t be many new completions which could cause strong upward pressure on prices.
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