May 6

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GTA Real Estate Sees Lowest April Demand Relative to Supply in the Last 10 Years

With Les Lamb

May 6, 2024


In the dynamic world of real estate, the Greater Toronto Area (GTA) stands as a pivotal hub, attracting attention from buyers, sellers, and investors alike. In this article, I’ll delve into the nuances of the GTA real estate market, exploring the interplay between demand and supply so far this spring.

Demand: Lowest April Sales in the Last 10 Years (Except for 2020)

chart showing 10 years of GTA real estate sales to april, 2024
GTA monthly sales – last 10 years

The demand for real estate is best gauged by the number of actual sales. In April, 2024, residential sales in the GTA for the month of April dropped to *6,652. This is the lowest demand we’ve seen for the Greater Toronto Area in the last 10 years, except for April, 2020, when the pandemic had just begun.

Why is the demand so low? Affordability remains a challenge, with 72% of buyers saying in a recent BMO survey that they have put off their home search until 2025 or later, while they wait for interest rates to come down. Another factor may be that buyers are now expecting an increase in supply, since the federal government’s promise to build four million new homes by 2031.

They may be waiting longer than they think. Promises make for good politics, but practically speaking, more than one home would need to be completed per minute to reach that goal – and that’s if the first shovel had already hit the ground on January 1 this year, before that promise was made.

Meanwhile, the CMHC forecasts that housing starts will be even lower in 2025-26 than they were for 2021-23. Builders, not governments, build homes, and times are hard for builders right now. To stimulate home building, interest rates must come down, the labour shortage must be addressed and red tape must be reduced. Once we return to a builder-friendly environment, building will slowly begin to resume. In housing, demand comes quickly, but supply takes time.

Supply: New Listings Up 47% Over April 2023 (But Down from 2021/22)

chart showing 10 years of monthly number of new listings for the GTA, to April, 2024
GTA monthly new listings – last 10 years

Supply can be measured by the number of new listings in a given month. You may have heard that a massive amount of listings suddenly came online last month. That’s only true if you’re comparing it to last April, which saw the lowest number of listings in the last 10 years, except for April, 2020.

The number of new listings in the GTA last month was actually quite unremarkable. In fact, it was lower than April of 2022 or 2021. So while it is up 47% from last year, when you put it in context, the story for April was more about the low demand, rather than a high supply.

Putting it Together – The Supply and Demand Relationship Over Time

chart showing 10 year monthly relationship between supply and demand for GTA real estate, to April, 2024
GTA monthly sales vs new listings – last 10 years

To track the relationship between supply and demand, real estate professionals most often use the SNLR, or sales-to-new-listings ratio. This is calculated by dividing the number of sales by the number of new listings, and expressing the result as a percentage. Using that ratio, a percentage between 40 and 60% is considered typical of a balanced market, with anything below 40% taking us into buyer’s market territory, and a number higher than 60% indicative of a seller’s market.

In the table below, you’ll find the data from the charts above. It shows the last 10 years of sales for the month of April in the Greater Toronto Area (GTA), with sales, new listings and SNLR.

data table of supply and demand relationships in the gta real estate market for april in the last 10 years

As you can see, perhaps the other story here is that this April, we had the lowest SNLR (demand relative to supply) in the last 10 years. In a low demand environment, prices can still remain stable as long as the supply doesn’t significantly outpace it. However, if low demand is met by high supply, then over time, falling prices are sure to follow. At this point, it’s too early to call this low SNLR a trend. However, it is interesting in light of other indicators, and worth keeping an eye on over the coming months.

What Will the Summer Hold for GTA Real Estate?

If the Bank of Canada cuts interest rates in its next rate announcement in June, it could stimulate some buyers to return to the market. However, in similar economic cycles in the past, home prices actually declined even after the first rate cut. Typically, the Bank of Canada waits to initiate the first rate cut until things are so bad that they have no choice. It then takes time for the economy to slowly recover.

The unemployment rate will be another number to watch, which just jumped from 5.8% in February to 6.1% in March.

On the supply side, we’re already seeing an increase in mortgage arrears and delinquencies. Every month, another round of mortgages comes up for renewal at higher rates. Almost 2.2 million borrowers, representing 45% of all Canadian mortgages, will be renewing this year and next. Accordingly, we have seen an increase in power of sale listings over the last year, and more will likely follow.

In the short-term, if investors respond to the new capital gains tax coming in June by divesting their holdings before then, we can expect a sudden, but short-lived, boost in new listings this month.

All of this would make it appear that we are headed for continued low demand, increased supply, and falling prices in the near future. However, this time, we have a sleeping giant. To my knowledge, there has never been a time when Canada has had fewer homes per capita. It may be that this unprecedented level of new demand that has made this market so resilient – even stubborn to tame – could also make for an atypically quick rebound compared to similar cycles in the past, whenever interest rates do fall and the economy begins showing signs of improvement.

Thanks for reading. If you live in or around Durham Region, Ontario and you’re not working with a REALTOR© already, please contact me if you’d like further information specific to your property, neighbourhood or city.

*Note: the TRREB statistics used in this article are sourced from Trenlii Inc, which parses the data slightly differently than TRREB itself. However, since all of the numbers are from the same source, using the same methodology, they provide a fair comparison for tracking trends over time.

Les Lamb

About Les

I'm your hard-working, full-time REALTOR©, serving in and around Durham Region, Ontario. I specialize in client care and communications. My client-centered approach puts you first and takes the stress out of your home buying and selling experience. How can I help you?

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