Despite interest rate cuts, housing market remains sluggish

The Bank of Canada implemented three 0.25% interest rate cuts so far this year, marking the first reductions in over four years. These cuts sparked optimism that the housing market might experience a price boost as sidelined buyers re-enter the market. Contrary to this, the market has seen a greater influx of sellers who had been holding off on listing their homes, rather than a strong return of buyers. A June 2024 survey by the Toronto Regional Real Estate Board (TRREB) indicated that rate cuts totaling at least 1.00% would be necessary for many buyers to return. The potential for a larger 0.50% rate cut at the end of October, along with further projected interest rate cuts through 2024 and into 2025, could push the cumulative reduction to 1.25% and possibly a return to a stronger housing market.

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The market in September

Housing supply increased in the GTA in September from August by 11%, while sales remained the same. Elevated inventory levels have impacted buyers and sellers who are actively involved in GTA’s housing market. For buyers, the increased supply means more choices and potentially greater negotiating power, as higher inventory can put downward pressure on prices. Properties sit on the market longer than they had earlier this year and only the ones that show well and are priced right are selling.

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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?

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Low-rise (detached, semis & townhouses)

The detached market in the GTA was slower than in previous years. Most of the GTA was in a buyer’s market in September with moderate downward pressure on prices. Durham Region (3.6 M.O.I.) & Toronto (4.0 M.O.I.) detached homes were in a balanced market without a noticeable effect on prices. Dufferin Region (5.0 M.O.I.), York Region (6.0 M.O.I.), Peel Region (5.1 M.O.I.), and Simcoe Region (6.4 M.O.I.) were in a buyer’s market with moderate downward pressure on prices. This has resulted in longer times on the market and lower sale prices. Sellers must have competitive pricing and presentation to attract buyers.

Semi-detached homes, as always, fared better than detached homes. The absorption rate for semis in the GTA in September ranged from 2.4 months of inventory to 4.2 months of inventory. This indicates a mostly balanced market across the GTA for this segment. Freehold towns were mostly in balance market territory as well, without any significant impact on prices.

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Condo apartments

Condo apartments were in a buyer’s market in September, with continued slight downward pressure on prices.

As indicated by the months of inventory report, York Region (5.7 M.O.I.), Toronto (7.0 M.O.I.), and Peel Region (7.6 M.O.I.), are all in a buyer’s market with slight to moderate downward pressure on prices. Sellers must be aggressive with their pricing and present their units well to get any activity. 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.

Condo Rents Decline 1.7% from Last Year

Source: Urbanation Inc & Rentals.ca Network

Asking rents for condominium apartments declined by 1.7% annually in September to an average of $2,296. The year-over-year decline in average condo rents was concentrated in Vancouver (-13.6% to $3,232), Toronto (-7.7% to $2,745) and Calgary (-3.4% to $2,060). Condo rents were down compared to a year ago across all unit types except for three-bedroom units, with studio units recording the largest decline of 3.9% to an average of $1,871.

Meanwhile, purpose-built apartment rents increased 5.4% annually in September to an average of $2,138. The least expensive purpose-built rentals, represented by studios, saw the fastest growth in rents with an 11.1% increase to an average of $1,645. Three-bedroom purpose-built apartments also experienced strong annual rent growth of 10.5% in September, averaging $2,730.

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