Swing and a miss—strike two for interest rates boosting Greater Toronto real estate demand. Toronto Regional Real Estate Board (TRREB) data shows home prices slipped lower in July. Despite a narrative of rapid population growth, demand remains historically weak as sellers appear in near record high volumes for the month, only to find one of the weakest buyer turnouts.
Greater Toronto Real Estate Prices Have Stalled For 3 Years
The benchmark price of a typical home across Greater Toronto.
Source: CREA; TRREB; Better Dwelling.
Greater Toronto once again saw real estate prices slip lower. The price of a benchmark home fell 1.2% (-$13,300) to $1,097,300 in July. That puts the price of a typical home 5.0% (-$57,100) lower than last year, and 17% (-$224,700) below the record high reached in March 2022. Home prices are roughly the same as they were back in October 2021, stagnating for nearly 3 years.
Greater Toronto Real Estate Price Declines Are Accelerating
The annual rate of change for a composite benchmark home across Greater Toronto.
Source: CREA; TRREB; Better Dwelling.
Real estate investors were hoping that home prices would get a boost from lower rates, but the trend appears to be moving in the opposite direction. Annual growth is moving deeper into negative territory—good news for buyers, bad news for sellers.
Toronto Real Estate Sales Remain Weak While Inventory Pops Much Higher
Weak demand is a large part of the issue, especially when contrasted with the sudden surge of inventory. There were 5,391 existing homes sold in July, a 3.3% increase compared to a year prior. It’s growth, but not much—that made the third weakest July in well over a decade of data. Only 2022 and 2023 were weaker in recent history, showing some progress but things are far from normal.
At the same time, a lot of sellers have been hitting the market. New listings climbed 18.5% higher from last year to hit 16,296 homes in July. It was the biggest increase for the month since 2020.
The surge of new inventory helped to produce one of the weakest demand balances on record for July. The sales to new listings ratio (SNLR) fell to just 33%, a level never before seen in the month. The level is well below where the demand is considered oversupplied, where the industry expects prices to fall.
Toronto Real Estate Inventory Hits Highest Level Since 2010
Greater Toronto active listings for the month of July.
Source: TRREB; Better Dwelling.
Speaking of inventory, it’s not just new supply—a lack of sales is allowing inventory to accumulate. Active listings at month-end saw annual growth of 55.4% to 23,877 units in July. An unusually lofty number for the month—the most homes since 2008.
Greater Toronto real estate is facing historically weak demand, though prices haven’t budged much from last year. The tight consolidation of the price range shows the market is uncertain of which way demand will head, and it’s easy to see why.
On one hand, the real estate industry is calling for higher demand in response to lower rates, the same factor that pushed the market much higher. Add to that a region that is traditionally the recipient of much of Canada’s fast growing population.
On the other, investors aren’t seeing the easy money they once did. Much of the inventory being sold is from investors looking to lighten their position. At the same time, new condo investors are finding out the returns are nowhere close to what was expected, while rental vacancies surge higher. The narrative and data are at odds with each other, and it won’t be clear for another few months which is correct.
The real estate industry lives in its own little bubble. It must be a shock to discover that people don’t want to pay 1.3 million for a 1960’s sidesplit and hour from work. And that new Cdns. don’t have the money to spend 1.3 million for a 1960’s sidesplit.
Back in the 70s, 80s and early 90s when I sold real estate if you had a sales to listings ratio of 33% you would have thought you had died and went to heaven. The problem with people writing these articles is they think 10 yrs or 20 yrs is forever historically. U affordability in many markets keeps buyers out of the market and so does the availability of housing much more affordable markets like the prairies right now. People are much more mobile than at any other time in history. When those cheaper markets become unaffordable and they probably will – the buying population will shift again to these markets again as they become more affordable.
When you have to pay 1.5 million for a Toronto house when for $400,000 you can buy the almost identical one in Saskatoon, Regina, Edmonton, Lethbridge, Red Deer, Winnipeg and other places – doing so can be life changing beyond your imagination. Especially someone downsizing like we did replacing our family home with a spacious, modern and upscale townhome in a lakeside resort community for 1/7th of what we sold for. I am sure others are doing the same too. Even if you have to quit your job it is worth it as you could work for minimum wage and be better off or just retire.
People are starting to smarten up and are trying to get out of the overpriced unaffordable cities in Ontario and in British Columbia. That will put pressure on the more affordable markets in Canada. That is the kind of real estate market we are in and hit has been like that for years but never to this extent.
Trudeau needs to step and in prevent this decline of prices. Homeowners need to have a guarantee of higher price otherwise the country will decline. They took risk to buy the house and need to be supported by goverment.
Is this now the only English sentence needed for the citizenship exam? I’ve seen you write the same comment almost every day now.
What is going on with commercial real estate in Toronto? It seems like the prices for leases are constantly moving up in leaps and bounds. At what point do business start leaving because of the insane lease prices in the commercial space?
Tell me about it. Then there’s the taxes, because when they up zoned your landlord’s property the tenants need to pay a premium to make up for the taxes in the properties that haven’t been built yet.
The government in Toronto is incredibly seedy. They know these are renovations, but they don’t want the city as it is—they want a new wave of investor-designed neighborhoods.
Government needs to support housing prices. We need to see appreciation in housing prices for them to build new housing so as to solve the affordability crisis. I myself have 4 investment properties but rent is not covering carrying cost anymore and their value is not appreciating anymore. I will not invest in more properties to provide for renters if prices are falling.
I think many people here do not understand supply and demand very well. Some lessons in economics are necessary.
Or you made a bad investment? Ever think about that? Buying 4 properties at ATH housing prices and mania? Hmmm? Did you do the risk assessments on rising interest rates due to inflation and QE? Think before you sign away millions of dollars of debt to the bank that you expect your tenants to pay off for you. There’s a word for this kind of behaviour – it starts with a P and ends with Site.
The interest rates were 0 when I buy. The government said they will not rise for a long time. And then they increased interest rates. I think they should make support so that the honest hard-working landlords providing a crucial service can get some basic support. This is the way the system has been designed for a long time too. It would be bad to change it now.
If govt does not build (and they wont; they can’t) and investors like me do not provide for developers to make housing, the current homelessness crisis would look like a picnic in 5 years. Maybe something you should think about a bit.
What you are doing is just plain gambling. I personally would not bank on prices always going up and ignoring ROI from cashflow. Anything you buy must cashflow or you at least have the opportunity to raise the rents to get a decent return. I shake my head at the presale condo market that has gone on now for many years. About 40% of the new housing rental stock has been from this wrongly thought out way of building rental units. A majority of the people buying these have been driven out of the market by misguided government policies. We cannot count on this largely foreign investment financing new rental construction anymore. Taxpayers will have to fund most of the new and increasingly more expensive construction from now on of tiny undesirable apartments nobody really wants to live in. Today’s housing unit is not nearly the size it used to be. Soon they will be counting walk-in closets as housing units to skew the numbers so when politicians make housing announcements they have something to crow about.
The capital gains changes really take the incentive out of owning revenue properties. High prices make a decent ROI near impossible today and what has been going on is shear speculation based on rapidly rising prices. I have always based my rental property investment on the net % return I would receive on my cash investment from just the rental income. The best way to avoid or possibly delay the taxation of your profit is to increase the value of your property and get a mortgage as cheap and as long as you can to take the money you want out. This way you pay no capital gains tax and you can offset your cash flow income by claiming straight line depreciation. I remember in the 80’s I knew a guy John B. who bought some 4 plexes after the market crashed and over time increased the values and mortgaged his way out during lower interest times. Depreciated the dickens out of them to maintain his cash flow and as long as he never sold them would never have to recapture the depreciation. Milk out the equity over time and let the estate deal with it when you are 6 feet under.