Sales Slowed Down Even Further
June 2024 home sales in the GTA were lower compared to the same month last year. Despite the Bank of Canada rate cut at the beginning of last month, many buyers kept their home purchase decisions on hold. This resulted in a 16.4% decline in sales compared to June 2023.
New Listings: The market remained well-supplied with new listings up 12.3% year-over-year.
Average Selling Price: There was a slight dip of 1.6% in the average selling price compared to June 2023.
Investors are not optimistic about the condo market.
Gus Papaioannou, @Smarter_RE
Condo investors are rushing for the exits. Higher interest rates are driving up mortgage payments, making condominium investing far more expensive.
Rents are not high enough to cover the average investor’s mortgage, taxes, and maintenance fees. Moreover, declining rents have left investors less optimistic about the future price growth for Toronto condos.
The City of Toronto has just under 6 months of condo inventory. “Last time we had more condo inventory was November 2008. About 7 weeks after the 2008 Stock Market Crash & beginning of the 2008 Financial Crisis in the US. Not even peek COVID had this many condos for sale when many were fleeing them to move away from the crowded core.” – Gus Papaioannou
Smaller condos, especially those 500-599 square feet, saw the biggest increase in listings, up 50% from last year. Sales for units under 500 square feet have declined the most, mainly due to reduced investor demand from high interest rates. Larger units saw a moderate decline in sales. Despite more listings, prices have remained stable, but future price trends are uncertain and depend on inventory levels.
Government Policy Impact on Population Growth
Canada’s population exceeded 41 million, with a record growth of nearly 1.27 million. Growth primarily driven by non-permanent residents. A key factor that could influence the housing market is the federal government’s plan to scale back the number of non-permanent residents in Canada.
Non-permanent resident permits hit record highs monthly since April 2022, but declined in April 2024. Non-permanent residents increased by 131,810 in Q1, now 6.8% of the population. Government aims to reduce this to 5%, requiring a net decline of 700,000 non-permanent residents.
This policy could significantly reduce demand for new housing, particularly rentals, as non-permanent residents are more likely to rent than buy.
Market Projections
Supply Pipeline: The condo market has a significant amount of supply currently in the pipeline. The number of condos currently under construction is near record highs and well above that of low-rise houses. Most of these condos are intended for rental, often bought by investors.
Potential Opportunities: First-time buyers trying to enter the market might find some great opportunities to buy a condo at a great price. Upsizers can benefit from lower low-rise home prices before the prices start to rebound when interest rates come down more.
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