The Bibby Group | July 2024 Newsletter

When the Bank of Canada cut its benchmark interest rate by a quarter percentage point last month, some industry insiders assumed that market conditions would become less restrictive for buyers and Toronto’s real estate market would be re-energized overnight. I viewed these public predictions as misleading, and my instincts were right: the revitalized market has failed to materialize as many had expected. Many buyers have kept their home purchase decisions on hold, and the marketplace has remained well supplied. Sales data suggest that something will have to change before buyers can move from the sidelines—either a decline in interest rates or pricing. Indeed, a recent Ipsos poll conducted by the Toronto Real Estate Board revealed that cumulative rate cuts will be required to boost home sales significantly if pricing remains flat, suggesting our recovery will be a more drawn-out process.

The Toronto Real Estate Board released its latest Market Watch report last week, which revealed that overall home sales are down 16.4% from this time last year, while new listings are up by 12.3% on a year-over-year basis. The condominium market has received plenty of attention due to year-over-year supply up 86% (a record high) and sales down by 25%. Since the BoC signalled a rate cut on June 5, supply has increased in the sector by 27%. Central Toronto condominium values overall have remained relatively flat, down 2% year over year; however, the downtown core (C01 District), which houses many of the city’s rental units, has posted a 7.6% year-over-year price decline—a clear indication that investors are heading for the exits and our buyer base is mainly end users. It’s worth noting that larger units appear to be experiencing more moderate declines. On the central Toronto housing (freehold) side, we can see that year-over-year detached home values have declined by approximately 5%, while supply has increased by 51%. The semi-detached market has seen prices decline by 8% year over year, while supply is up approximately 20%.

While some agents are advising clients to avoid listing their homes due to abundant inventory, the product, price and micro-market will ultimately dictate the outcome. Case in point: we recently represented an exceptional condominium sale that attracted 18 visitors over three days and resulted in a record sale for the building despite the market conditions. It was the first time since the building’s construction (24 years) that the unit had been listed for sale, demonstrating a high demand for one-of-a-kind product. On the other hand, during the same period, I have unfortunately witnessed other locations and buildings with exceptional properties that could not attract significant interest due to competing inventory.

Should supply levels continue to increase in the months ahead, we could see some downward pressure on pricing. The time of year is also a factor, with summer months typically slower than spring and fall. We recently took three listings off the market that were receiving limited showings. Fortunately, the sellers had the luxury of waiting or modifying their strategy. As I write this newsletter, however, we are negotiating four transactions on behalf of sellers (the prospective buyers are all end users). I can see the gap widening between what buyers and sellers want, which could mean that deals are more difficult to complete as both parties respectfully protect their interests and negotiations become drawn out. I understand the position of both sides in the transaction, of course.

As I have said before, in this type of climate, sellers should remain resilient and realistic with their expectations. Properties are going to take longer to sell. Accordingly, sellers need to ensure their strategies are aligned with reemerging market trends. Overall, buyers have the upper hand due to a broader spectrum of inventory. However, if their expectations are unreasonable, they will likely be unsuccessful, as quality inventory will always be far better insulated from price erosion. The takeaway moving forward: if all parties can work together, this will hopefully lead to everyone’s success in the coming months.