The housing market in Toronto is facing challenges this summer, as affordability remains strained amid higher borrowing costs. A recent report by RBC Economics highlights the sluggishness in the market, with the need for further rate cuts to stimulate sales activity.
According to the report, there was a modest increase in resales in June, but this gain was offset by a 0.7 per cent decline in July. Buyers are seeking larger rate cuts to alleviate the pressure on affordability, as demand continues to lag behind the surge in properties for sale.
Inventories are accumulating rapidly, especially in the condo market where new unit completions have led to a 64 per cent increase in active listings compared to a year ago. Detached home listings have also seen a 48 per cent increase year-over-year.
Despite the increase in supply, home prices have remained largely flat over the past four months. The MLS Home Price Index benchmark was $1.09 million in July, down five per cent from a year ago. Condo prices have accounted for most of the annual decline, with mounting inventories expected to put further downward pressure on prices in the near term.
The report suggests that the Bank of Canada’s interest rate cuts earlier this summer have had a mixed impact on housing markets across the country. While some markets, like Edmonton and Montreal, have seen a slight uptick in activity, others, including Vancouver, Calgary, and Toronto, have experienced a decline in home resales.
The Bank of Canada reduced its key interest rate to 4.5 per cent in July, marking the second consecutive cut this year. However, the report emphasizes that deeper rate cuts will be needed to significantly reduce ownership costs and stimulate broader homebuyer demand.
The balance between supply and demand varies across different markets, with conditions favoring sellers in Calgary, Edmonton, and Montreal, while buyers have the upper hand in the Toronto area. Vancouver is experiencing a tenuous equilibrium between buyers and sellers.
Overall, the report paints a picture of a Toronto housing market struggling with affordability and subdued demand. While the recent rate cuts by the Bank of Canada have provided some relief, further action may be necessary to jumpstart sales activity and stabilize prices in the long term.