Posthaste: Toronto's housing market has an Achilles heel that could cool prices for months to come
Toronto’s housing market has ground to a halt and so far not even the forces of Bank of Canada interest rate cuts have been able to revive it.
Housing market conditions in the Greater Toronto Area are the softest they have been since the 2008 recession, outside the pandemic, says National Bank economist Darren King.
And though home sales here inched up 0.6 per cent in August from the month before, they are still an “astounding” 32 per cent below pre-pandemic levels, said Royal Bank of Canada economist Robert Hogue.
Economists believe that sales will eventually pick up as the Bank of Canada continues to cut rates, but growth in average prices could still lag behind.
A big reason for this is Toronto’s glut of condos up for sale, said Rishi Sondhi, an economist with TD Economics.
Over the past year condo listings have climbed to about 30 per cent above normal levels, while sales are 25 per cent lower than before the pandemic.
The sales-to-active listings ratio in the GTA condo market, which measures the balance of supply and demand, is 60 per cent below the long-term average, “meaning there was too little demand chasing too much supply,” he said.
There are myriad reasons for this state of affairs. Higher interest rates have made it difficult for some buyers to close on their mortgage and investors, many of whom are losing money on their rentals, are listing more properties. A recent wave of condo completions is also adding to supply.
To add to these problems, the job market is weakening. (Toronto has one of the highest unemployment rates in Canada, see below.)
Sondhi expects sales won’t climb back to pre-pandemic levels until next year and this will put more pressure on benchmark condo prices, which already have fallen 5
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