Rising Inventory and Surprising Trends in Toronto's Real Estate Market
Sales Commentary
This year's spring market is proving far from traditional. The uncertainty surrounding when interest rates will begin to decrease has kept buyers hesitant and lacking confidence to re-enter the housing market. Additionally, the government's announcement of a change to the Capital Gains tax inclusion rate has added to the uncertainty regarding its impact on the housing market. While this announcement wasn't the sole reason, each passing week has seen a growing pause among buyers, coupled with a consistent increase in inventory, fueling anticipation that values may still have room to decrease.
Despite a year-over-year decrease of 21% in sales, this is not reflective of the overall market. Freehold homes are experiencing reasonable levels of demand, depending on location and condition. Semi-detached homes in the entry-level price ranges, targeted by first-time buyers, have seen the most activity and, in many cases, competition. The freehold market is more balanced, contingent on two important factors: location and price point.
Condo & Pre-Construction Market
The sector most affected is the condo market, with a 24% decrease in sales and a 34% increase in supply, continuing to outpace sales. Despite the increased supply, there has been minimal impact on values. While there was a year-over-year dip in values by 2.4%, condos posted a month-over-month increase of 0.4%. The condo market currently has 4.2 months of inventory. Condos are simply taking longer to sell, and units that are tenanted are less desirable, as buyers do not want to assume tenants, especially with stories of tenants refusing to move out and requests for cash-for-keys. Interestingly, tenants currently have the opportunity to find a unit for less than what they are presently paying.
Toronto Rental Market
While rental listings continued to outpace lease transactions, demand began to increase throughout the month, resulting in a 20% year-over-year increase. Another positive is that the inventory level of rental units remains unchanged from April, holding steady at 0.9 months of inventory. The rental market is beginning to experience more activity, and rents are expected to stabilize and post moderate increases moving forward.
