The Bank of Canada's first interest rate cut in four years has done little to boost Toronto's real estate market, as sales continue to drop — with condos showing a whopping 28 per cent decrease in June compared to the same time last year.

Many buyers are waiting for more rate cuts before jumping into the market, lessening demand — but new listings were up 12 per cent year over year, keeping the market well-supplied, according to the June report from the Toronto Regional Real Estate Board (TRREB) released Wednesday.

"The Bank of Canada's rate cut last month provided some initial relief for homeowners and homebuyers," TRREB president Jennifer Pearce said in a statement. "However, the June sales result suggests that most homebuyers will require multiple rate cuts before they move off the sidelines."

An Ipsos poll conducted for TRREB suggests that cumulative rate cuts of 100 basis points or more are required to boost home sales by a "significant amount," she added. On June 5, the Bank of Canada cut the overnight rate by 0.25 percentage points. Economists forecast the rate cuts will be gradual with just one or two more by the end of 2024.

Sales and prices were down across Toronto and the GTA for all property types.

Poor condo sales continued to plague the sector with a 28 per cent drop in June compared to the same time last year, followed by townhouses down 14 per cent, semi-detached down 11.4 per cent, and detached down 10.6 per cent.

Prices for all housing types also dropped year over year, with semi-detached seeing the greatest decline at 9.3 per cent, followed by townhouses down 4.9 per cent, detached at 3.3 per cent and condos at 1.5 per cent.

People need homes, so why is the condo sector struggling?

Condos are typically entry-point homes for first-time homebuyers and while many are close to purchasing their first home they need to see more relief on the interest rate front, said Jason Mercer, TRREB chief market analyst, in an interview with the Star.

"According to the Ipsos polling results, potential first-time homebuyers are in high-rent environments and are considering purchasing," he said. "But they need to see more rate cuts. So we could see them enter the market later this year and in 2025."

Experts also say the condo market has become a "ghost town" as over-leveraged investors try to off-load their condo properties and end users aren't interested in purchasing expensive, micro-sized units that can't accommodate families.

With little buying activity, active listings have shot up 67.4 per cent year over year. Currently, buyers are benefitting from "substantial choice" and "negotiating power on price," said Mercer. Currently, the sales to new listings ratio is 34.5 per cent, meaning Toronto is in a buyer's market.

"As sales pick up alongside lower borrowing costs, elevated inventory levels will help mitigate against a quick run-up in selling prices," Mercer said. TRREB forecasts that home prices will reach $1.17 million by the end of the year — the average home price in June was $1.16 million.

"There won't be an instantaneous upward pressure on prices," Mercer said. "Looking forward, buyers will take advantage of the lower prices compared to the 2021 and 2022 market, as well as lower borrowing costs, which will be important factors heading into 2025."

Credits: Toronto Star, Clarrie Feinstein
Published: July 4, 2024

Toronto condo sales plummet 28% in June

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