Sales Drop Sharply in a Key Canadian Real Estate Market

Despite the Bank of Canada's recent interest rate cut, home sales in Toronto have experienced a significant decline. The Toronto Regional Real Estate Board (TRREB) reported a 16.4% drop in home sales for June compared to the same month last year. Specifically, 6,213 homes were sold this June, down from 7,428 in June 2023. This downturn occurred despite the Bank of Canada's efforts to stimulate the market by reducing interest rates.

The average selling price in the Greater Toronto Area (GTA) also saw a decrease, falling 1.6% year-over-year to $1,162,167. Jennifer Pearce, president of TRREB, indicated that the recent 25-basis-point rate cut provided only minimal relief to the housing market. Pearce emphasized that more substantial cuts would be necessary to entice potential homebuyers back into the market. According to Ipsos polling for TRREB, a cumulative rate cut of at least 100 basis points is needed to significantly boost home sales.

The Bank of Canada initiated its rate-lowering strategy on June 5, reducing the key interest rate from 5% to 4.75%. However, Vy Ngo, a sales representative with Big City Realty Inc. Brokerage, noted that this reduction was insufficient to spur buyer demand. Instead, it led to a surge in supply as sellers anticipated a rebound in market activity. In June, the GTA saw a 67.4% increase in active listings compared to the previous year, with new listings rising by 12.3%, totaling 17,964 properties.

This influx of supply has provided recent homebuyers with greater choice and negotiating power, as noted by TRREB chief market analyst Jason Mercer. While home sales in Toronto dropped by 20.6% in June, and by 13.8% in the rest of the GTA, the elevated inventory levels are expected to prevent a rapid increase in selling prices as sales pick up with lower borrowing costs. Condo sales fell by 28.1%, and townhouses and semi-detached homes declined by 14.1% and 11.4%, respectively. Despite the challenging market conditions, Ngo highlighted the advantages for buyers, including increased supply and reduced competition, which offer greater negotiating leverage.