Yahoo Finance Toronto real estate plunges into 'buyers market' as sales slow and listings surge
Toronto home prices rose in September, but sluggish sales and a surge of new listings could be tilting the market back in favour of buyers.
Monthly data released by the Toronto Regional Real Estate Board (TRREB) on Oct. 4 showed the average price was up roughly three per cent month-over-month to $1,119,428 in September. That was also about three per cent higher than the same month a year ago.
Home sales, however, declined sharply from August. Sales registered through TRREB’s MLS System were down 12 per cent from the previous month and 7.1 per cent in comparison to September 2022. The decline in year-over-year sales was especially evident in semi-detached houses and townhouses.
At the same time, new listings surged. In September, 16,258 new listings came on the market, a 32 per cent increase from August and 44.1 per cent higher than a year ago.
That left the sales to new listings ratio (SNLR) for September at 28.6 per cent, firmly in buyers’ market territory. The Canadian Real Estate Association (CREA) has said that an SNLR between 40 per cent and 60 per cent is indicative of a balanced market. Below 40 per cent suggests buyers have an advantage, while above 60 per cent points to a sellers’ market.
The SNLR for the Toronto region covered by TRREB had been above 60 per cent as recently as March and April of this year, but has been trending down since then. In August, it stood at approximately 43 per cent, according to calculations based on TRREB data.
TRREB’s chief market analyst, Jason Mercer, suggested buyers might see some increased leverage as a result of the shift.
“GTA home selling prices remain above the trough experienced early in the first quarter of 2023. However, we did experience more balanced market in the summer and early fall, with listings increasing noticeably relative to sales,” Mercer said in the report. “This suggests that some buyers may benefit from more negotiating power, at least in the short term. This could help offset the impact of high borrowing costs.”
TRREB president Paul Baron said the market outlooks in the short and medium terms were very different, and that lagging demand should turn around by the middle of next year.
“In the short term, the consensus view is that borrowing costs will remain elevated until mid-2024, after which they will start to trend lower,” Baron said. “This suggests that we should start to see a marked uptick in demand for ownership housing in the second half of next year, as lower rates and record population growth spur an increase in buyers.”
The belief that the Bank of Canada has concluded its rate hikes was echoed in an Oct. 4 report from Toronto-Dominion Bank economist Rishi Sondhi.
“We currently assume that the Bank of Canada is finished raising rates and will start to take the policy rate lower beginning in the second quarter of next year,” Sondhi said in the report.
In the meantime, the bank’s projection indicates a more significant and prolonged decline in Canadian home sales and average prices than previously anticipated in their June forecast.
“Indeed, both home sales and prices are likely to record declines in the final quarter of this year and the early part of 2024,” Sondhi said in the report. “By 2024 Q1, we expect that sales and prices will have fallen by eight per cent and six per cent, respectively, from their 2023 Q2 levels. These projected pullbacks pale in comparison to the 40 per cent and 20 per cent declines in sales and prices that took place from 2022 Q1 to 2023 Q1 amid aggressive Bank of Canada rate hikes.”
Cameron Forbes, chief operating officer at Remax Realtron Realty Inc. in Thornhill, Ont., said that while an abundance of listings can reduce buyer competition, it doesn’t necessarily lead to large price adjustments or a significant decrease in prices.
“In certain markets, where there is more supply that’s coming to the market, certainly prices are not going up, maybe declining a little bit. I don’t see any sort of big adjustment in prices and the reason for that is that people who own homes will not sell at what they perceive to be a lower market price unless they have to.”
But Toronto realtor Cailey Heaps believes the balance has indeed shifted in favour of buyers.
“Buyers definitely have more power than they’ve had in quite some time,” Heaps said. “However, it is dependent on price point and geography because in the market there’s little micro markets and micro economies within the Toronto real estate market.”
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She points out that during negotiations, buyers are keenly considering overall affordability.
“Buyers are factoring in the change in interest rates into their total purchase price and purchasing power,” she said.
• Email: shcampbell@postmedia.com
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