5 September: The Greater Toronto Area’s (GTA) condominium market experienced a significant decline in both sales and prices in August, suggesting that the Bank of Canada’s two interest rate cuts over the summer had minimal effect. According to the latest report from the Toronto Regional Real Estate Board (TRREB), condo prices in Toronto fell by 6%, while sales dropped by 14.8% year-over-year. In the suburban areas, sales decreased by 4.4%, and prices saw a slight decline of 0.8%.
The downturn in condo sales is largely attributed to first-time buyers being priced out of the market and investors withdrawing due to high interest rates. Jason Mercer, TRREB’s chief market analyst, noted that first-time buyers, who are more sensitive to interest rate changes, represent a significant portion of the condo market. He expects a gradual increase in demand from these buyers as interest rates continue to fall.
Despite falling prices, many condo sellers are hesitant to reduce their asking prices to align with the current market value, especially those who purchased at peak prices during the pandemic and hope to turn a profit. Mercer explained that the 6% drop in Toronto condo prices is partly because buyers currently have “a lot of negotiating power” due to the surplus of available units. He anticipates that as demand returns and inventory decreases, investors may re-enter the market.
The broader real estate market in the GTA also struggled in August, with homes remaining on the market for an average of 28 days, a 40% increase from the previous year. Mercer noted that buyers now have more options and can take their time to secure a favorable deal.
Overall, home sales across the GTA declined by 5.3% in August compared to the same month last year and fell by 7.7% from July. New listings increased slightly year-over-year, while active listings surged by 46.2%. Historically, the GTA has been characterized by a shortage of available properties, but the current market offers more choices, a situation last seen during the 2008-09 financial crisis and the early months of the pandemic. As interest rates continue to drop, Mercer expects active listings to decrease as well.
The average selling price in the GTA fell by 0.8% compared to August 2023, landing at $1,074,425. On a seasonally adjusted basis, the average price was slightly lower than in July. Prices for all property types in the region declined, with detached, semi-detached, townhouse, and condo prices decreasing by 0.3%, 3.9%, 4.6%, and 4.5%, respectively.
Despite the current challenges, TRREB President Jennifer Pearce believes that the Bank of Canada’s recent 0.25 percentage point rate cut will offer some relief to prospective homebuyers, particularly those entering the market for the first time. Pearce anticipates an increase in first-time buying activity as mortgage rates continue to decrease this year and into the next.
Mercer added that as borrowing costs decline over the next year and a half, homebuyers will benefit from both lower monthly mortgage payments and reduced home prices. However, even with a potential increase in demand, particularly by 2025, it will take time for the market to absorb the current inventory of listings. Ample supply will likely keep price growth moderate in the early stages of the market’s recovery.
