The Bank of Canada’s much anticipated reduction of its key interest rate began with a rate decrease of 25 basis points, bringing the new rate down to 4.75%. While a minor change, it signals a shift from the Bank of Canada, kicking off an easing cycle that will deliver lower interest rates now that inflation is under control.

In the GTA, May home sales remained slower than average, however in the wake of an interest rate decrease, an increase in sales activity is on the horizon for the second half of 2024. While sales were subdued, prices were once again resilient. The average selling price of $1,165,691 was down by 2.5% over the May 2023 result of $1,195,409. On a seasonally adjusted monthly basis, the average selling price edged up slightly compared to April 2024.

7,013 homes were sold in the GTA in May 2024 – a 21.7% decline compared to 8,960 sales reported in May 2023. New listings amounted to 18,612 – up by 21.1% year-over-year, as sellers positioned themselves to take advantage of strong home prices and an increase in demand following the June interest rate announcement.

Increased inventory in the condominium segment will create an opportunity for buyers this summer. Inventory in the condo sector has surged year-over-year, resulting in 8,183 active listings. Despite this increase, sale prices for condos remain stable, with the average condo selling for $730,815, marking a modest 2% yearly decline.

The detached home segment is also seeing higher inventory, with 9,335 active listings—the highest level since September 2019. The average sale price for detached homes across the GTA is now

$1,506,675, reflecting a 3% yearly decrease.

The semi-detached and townhouse sectors also saw significant increases in active listings, and sale prices for semi-detached homes now average $1,173,819, marking a 3% month-over-month increase.

Townhomes are now selling for an average price of $1,040,141.

Consumers have clearly indicated that lower interest rates will act as a catalyst for buyers re-entering the housing market.

"Recent polling from Ipsos indicates that home buyers are waiting for clear signs of declining mortgage rates. As borrowing costs decrease over the next 18 months, more buyers are expected to enter the

market, including many first-time buyers. This will open up much needed space in a relatively tight rental market," stated Toronto Regional Real Estate Board (TRREB) President Jennifer Pearce.

Recent research from Royal LePage concluded that the majority of buyers who put their home buying plans on hold when rates started to rise plan to resume house hunting once interest rates start to drop. 10% of those buyers said that a mere 25 basis point reduction in rates would be enough of an incentive to restart their home buying efforts.

While an increase in inventory means that GTA buyers currently have more choice in homes than they have seen over the past few years, a surplus of inventory will likely be short-lived as interest rates start to trend downwards and buyers re-enter the market. Increased competition will put upwards pressure on home prices in the latter part of 2024. In fact, Royal LePage predicts that aggregate home prices in the GTA will be up 10% in the fourth quarter of 2024, as compared to the fourth quarter of 2023.

As we move into a lower-interest rate environment and more robust sales activity, the issue of supply once again becomes a key focus. Without an adequate supply of new housing, competition for homes

will continue to increase, as will prices.

“In order to have an affordable and livable region over the long term, we need to see a coordinated effort from all levels of government to alleviate our current housing deficit and to provide housing for

new population moving forward. On top of this, governments need to ensure the delivery of infrastructure to support our growing population. The economic health and livability of our region depends on the timely completion of public transit projects including better transparency and clear timelines on the completion of the Eglinton Crosstown LRT,” said TRREB CEO John DiMichele.

While lower interest rates will be a relief to home owners and prospective home buyers alike, they cannot be the only mechanism to improve housing affordability going forward.

INSIGHTS