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As we move into September, the Greater Toronto Area (GTA) housing market continues to evolve against a backdrop of changing economic conditions. Recent data from the Toronto Regional Real Estate Board (TRREB) shows a slight decline in sales activity compared to August 2023, while new listings have seen a small uptick, indicating a well-supplied market. However, despite the increased inventory, the quality of available homes remains an issue, with many requiring renovations. Buyers, especially first-time purchasers, are primarily seeking turn-key properties but are finding limited options. This mismatch in supply and demand is a key dynamic in today’s market.
From a pricing perspective, the average home price in the GTA fell by 0.8% year-over-year to $1,074,425 in August 2024. The decline was driven by factors such as a higher proportion of detached homes in the sales mix, which has skewed the average price slightly. Nevertheless, on the ground, buyers are more price-sensitive than ever, especially in light of the recent interest rate adjustments.
Economic Influences: Interest Rates and GDP Impact
The Bank of Canada’s recent rate cut announcement in early September is expected to bolster affordability, particularly for those with variable-rate mortgages. This could stimulate more first-time buyers to enter the market, particularly in the condominium sector. With borrowing costs set to trend downward over the next year, it’s anticipated that buyer activity will continue to rise, though the effects will be more noticeable in 2025 when demand is expected to pick up more substantially.
Interestingly, Canada's economic outlook also plays a significant role in shaping the real estate market. Despite stronger-than-expected GDP growth in Q2 2024, projections for the third quarter suggest slower growth ahead. This coincides with concerns about rising unemployment, which reached 6.6% in August. Although employment figures rebounded, the slowing pace of economic growth could temper real estate market activity as consumers weigh their financial situations against rising inflation and higher interest rates.
Personal Take: The Reality for Buyers and Sellers
From my perspective, we are starting to see buyer activity pick up. However, the increase in inventory doesn't necessarily translate to high-quality homes. Many of my clients are looking for turn-key properties, but much of what's available on the market requires significant renovation work. On the selling side, homeowners are still slow to adjust to current realities, with many continuing to price their homes according to peak 2022 values. This misalignment is creating challenges in closing deals, as buyers are reluctant to pay for homes that are priced above today’s market conditions.
Looking ahead, we’ll likely see a gradual adjustment as sellers become more aware of the market shift and buyers regain confidence as interest rates and home prices stabilize. However, the affordability challenge remains, especially if municipalities don't take steps to reduce development charges and other barriers to building the types of homes that today’s buyers need.
Final Thoughts
As we navigate the final months of 2024, the GTA real estate market is poised for gradual recovery, driven by improving affordability and increased demand. However, the economic backdrop remains complex, with slower GDP growth and fluctuating employment rates adding layers of uncertainty. For both buyers and sellers, staying informed about market trends and economic shifts will be key to making sound decisions in this evolving landscape.
