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The ONE Reason Behind a Slow Toronto Real Estate Market

In the blink of an eye, we are almost half way through 2024!

We have been expecting a market recovery and spring is typically a very strong market.

So how’s the recovery coming along so far?

Let me start with the rental market.

During the first couple months of the year, there were 2 things that made the rental market sluggish.

One, the cap on international students.

Two, a record number of condo completions, especially in downtown Toronto.

But in the past one and a half months, things have significantly picked up in the rental market.

It just felt like people were coming back to the city.

Units are renting out much faster now, but in terms of rent, there is still some downward pressure because there are many units available on the market.

That being said, I still foresee a very strong rental market coming July and August when students prepare for the September semester.

So that’s a quick rental market update.

The sales market is…

…much more complicated.

Back in February, we felt a strong momentum in the resale market.

People were trying to get into the market before the rate cut comes.

Now that we are in May, I feel that the market lacks energy.

Things are becoming sluggish again.

It seems like people are getting tired waiting for that rate cut to come.

But when I look at the latest April market watch report, the data is actually telling me a different story.

In February, when we felt a strong momentum, we had around 5,600 transactions in the GTA.

In March, we had around 6,500 transactions.

And in April, we actually had over 7,100 transactions.

In terms of the average price, let’s start with detached homes in the 416 area.

February, $1.66 million dollars.

March, $1.71 million dollars.

April, $1.82 million dollars.

Detached homes in the 905 area.

February, $1.38 million dollars.

March, $1.40 million dollars.

April, $1.42 million dollars.

Condos in the 416 area.

February, $727,000 dollars.

March, $729,000 dollars.

April, $767,000 dollars.

Condos in the 905 area.

February, $640,000 dollars.

March, $647,000 dollars.

April, $656,000 dollars.

You see, prices are actually trending up for both detached homes and condos in both the 416 and 905 areas.

So we had 27% more transactions in April compared to February and prices are trending up.

We also had quite a few tenants telling us they had to leave because they bought their first home.

But why do we still feel that the market is sluggish?

By the way, if you enjoy this kind of market analysis where I combine official data with our day to day experience on the market, give me a like!

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Here’s the reason why the market seems to be lacking energy.

In February, the number of active listings, units available for sale on the market, was around 11,100.

In March, around 12,400.

In April, the number jumped to over 18,000.

We had 63% more listings in April compared to February.

You see, we had 27% more sales, but 63% more listings.

The market actually didn’t slow down, but there was a lot more inventory.

So a lot more people are trying to sell.

The most direct guess would be condo investors dumping their units because of the high interest rates.

Let’s break things down.

In February, there were around 3,800 active listings for detached houses.

In March, around 4,300.

In April, around 7,600.  That’s pretty much double the number of listings we had in February.

The number of investors in the detached segment should be minimal.

So this big jump in active listings could mean people are selling to downgrade because they can’t afford the mortgage at the high interest rate.

It could also mean people are selling to upgrade because the price drop in bigger houses is typically more significant than commodity houses. 

So bigger houses are viewed as a good deal right now.

Let’s take a look at condos.

In February, there were around 5,200 active listings.

In March, around 5,800.

In April, just over 7,000.

So the increase in condo listings was actually only 36%, which was significantly less than the 100% increase in detached listings.

In fact, in our resale department, we had fewer condo listings in April compared to February.

Some of the units got sold.

And some investors simply gave up selling because they saw that things were stronger on the rental market, so they decided to keep the investment for now and re-evaluate again next year.

So a quick summary of the latest market update is:

Prices are slightly trending up.  The number of sales has been increasing but the number of active listings is increasing at an even faster rate.

Here’s the thing.

I would really start to worry about this market if the number of active listings is increasing and the number of sales is decreasing, a lot of people are trying to sell and no one wants to buy.

But that’s not the case we are in right now.

Also, I think we are so used to a super competitive market in Toronto, so anything less than that just feels extremely slow.

Let’s see what kind of changes the rate cut is going to bring along to the market.

Yes, we are unlikely to see a rate cut in the U.S. until late 2024.

But Governor Tiff Macklem had openly said that Canada doesn’t have to follow what the Fed does.

[Play Clip]

Money market bid on a 0.25% rate cut in June is around 70% right now.

What’s your bid?

Comment below and let me know.


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