Overview: a look at the Bank of Canada’s (BoC) January 2025 rate cut, plus its impact on GTA home sales, prices, mortgages, buyers and sellers.
On January 29th, the Bank of Canada (BoC) slashed interest rates from 3.25% to 3%.
The 25 basis point reduction marks the sixth consecutive time the central bank has cut its policy rate.
But after December’s lukewarm housing numbers, economic uncertainty from U.S. tariffs, and a provincial election, will six rate cuts be enough to bring back buyers and sellers?
Let’s find out, starting with the latest numbers…
December 2024 GTA Housing Market Numbers
Here’s a year-over-over look at the December numbers:
- GTA Home Prices: down 1.6% to $1,067,186
- Toronto Home Prices: down 4.4% to $1,033,742
- GTA Home Sales: down 1.8% to 3,359
- Toronto Home Sales: down 62.2% to 1,174
- New Listings: up 20.2% to 4,681
- Active Listings: up 48.5% to 15,393
The housing market was showing signs of recovery, but all that changed in December.
Reuters reports:
December ended a streak of four consecutive monthly gains, which came after the Bank of Canada began in June to reduce its benchmark interest rate from a two-decade high of 5%.
In fact, home sales dropped to a five-month low—a fitting end to a tough year for GTA real estate.
The month-over-month numbers weren’t much better.
According to WOWA:
3,359 homes were sold in the GTA in December 2024, a decrease of 43% month-over-month, and down 2.5% year-over-year.
Meanwhile, home prices dropped 3.5% from $1,106,050 in November to $1,067,186.
At the same time, new and active listings fell 29% on a monthly basis but rose 48% year-over-year.
Lower sales and prices suggest a decline in buyer demand, while a slowdown in listings hints at hesitation on the part of sellers.
Given the December numbers, it seems unlikely that January 2025’s quarter-point cut will motivate a flood of buyers to enter the market.
December 2024 Home Prices By Property Type
Here’s a year-over-over look at prices by property type:
- Detached Houses: down 1.4% $1,399,209
- Semi-Detached Houses: up 6% to $1,088,543
- Townhouses: down 0.3% to $910,761
- Condos: up 0.1% to $681,855
Semi-detached homes and condos were the only properties to see price gains, with the former rising a solid 6% and the latter a modest 0.1%.
It was a mixed bag when it came to sales.
As Storeys.com reveals:
Most of December’s transactions were concentrated in the detached segment…down 5.8% from last year…compared to condo apartment sales (up 2.3%)…townhome sales (up 5.8%), and…semi-detached homes (down 9.3%).
Some properties saw gains, others losses, while condos were the only one to see both sales and price increases.
The month-over-month numbers were less kind to condos.
From November to December, detached home prices fell 3.7% and condos by 1.1%, while townhouse prices rose 2.1% followed by semi-detached homes at 1.0%.
Overall, it was a rollercoaster ride for all properties, with some seeing sales and price gains on a yearly basis, but declines on a monthly time-frame.
Despite prices falling month-over-month, condos were the only property to see an annual increase in both sales and prices.
This may have something to do with interest rates being lower, making the most affordable property even cheaper.
With the January 2025 rate cut, the most affordable property may just become this year’s most attractive property.
January 2025 Interest Rate Cut
Canada’s lenders were quick to react after the January 2025 rate cut:
On Wednesday, the major six banks announced they would decrease their prime rates by a quarter-percentage point, from 5.45 per cent to 5.2 per cent…
The impact of this move was immediate, though mostly limited to those with mortgages.
For instance, Ratehub calculates that people with variable mortgage rates (VRMs) will see their monthly payments drop by $87.
That might not seem like much, but together with previous rate cuts, the savings add up to $15,600 per year!
While the latest rate cut benefits homeowners, it won’t bring much relief to buyers or sellers, who have to deal with political and economic uncertainty.
So what will it take for buyers and sellers to return in significant numbers?
The answer is lower interest rates.
According to True North Mortgage:
Some experts have pegged a BoC resting rate of 2.0% in 2025 to spark our economy in light of trade turmoil…
With rates already at 3%, the BoC just needs to make four more cuts to reach that 2% target.
As Global News points out, the chances of that happening are pretty good:
Money markets see a more than 43 per cent chance of another quarter-point cut at the Bank of Canada’s next rate decision on March 12…
So interest rates are likely to fall again in March, taking the BoC’s policy rate down to 2.75%.
Where does this leave buyers and sellers?
Advice For Home Buyers
The fact is most people won’t.
But while there are good reasons to wait it out, there are better reasons to act now.
As the December numbers showed, home sales and prices are down on a monthly and yearly basis, whereas listings are up by double digits.
With supply overshooting demand, buyers who purchase a home today enjoy more choice, less competition and lower prices.
The average Listings Days On Market (LDOM) is also up 12.5% to 36 days, giving buyers more time before making a purchasing decision.
Those in the market right now can also expect some great deals.
As blogTO informs:
[An] incredible 93 per cent of GTA neighbourhoods were in “underbidding” territory in December, meaning most sellers accepted lower offers than they were hoping.
While buyers can negotiate on any property type, they truly have the upper hand when it comes to condos.
According to a January 2025 report from Wahi:
GTA condo buyers have been able to negotiate lower prices in part because supply levels remain high. There are also fewer condo buyers in the market, so there’s less bidding competition…
In fact, 80% of GTA condos are currently selling under list price!
Plus with the recent mortgage rules changes, like a higher cap on insured mortgages and extended 30-year amortizations, more buyers are eligible to purchase a home.
Advice For Home Sellers
However, the exact opposite is true…
As WOWA informs:
The much larger rise in home sales relative to new listings meant that December 2024’s sales-to-new-listings ratio (SNLR) jumped to 72%…pushing it into seller’s market territory.
A seller’s market strongly favours sellers over buyers, offering benefits like greater negotiating power.
But how is that possible if sales and prices are down and listings are up?
Because while listings rose annually, they fell 60% month-over-month, compared to sales decreasing by 43% over the same period.
In other words, there were a lot more homes being sold compared to the number of new homes being put up for sale.
Experts also predict home prices will climb 2.5% this year, with sellers of detached properties reaping big rewards.
Narcity reveals:
For single-family detached houses, Toronto’s median price is expected to hit $1,523,466 — a rise of a whopping 7%…
To make the most of the seller’s market and expected price increase, homeowners should prepare to list in March.
Global News explains why:
Some Canadian real estate watchers are expecting borrowing costs to hit their floor at the same time sellers flood the spring market with listings, unleashing a flood of activity… That could send home prices higher in many cities…
So serious sellers should be getting ready to list in time for the spring market, which is expected to be busy.
January 2025 Interest Rate Cut Conclusion
December ended on a low note, with sales and prices falling year-over-year as supply surged.
On the bright side, buyers benefited from plenty of choice, less competition, and the ability to underbid in most parts of the GTA.
Sellers, on the other hand, enjoyed rising prices for condos and semi-detached properties, and the expectation of higher prices to come.
While the January 2025 rate cut won’t draw most buyers from off the sidelines, it will motivate some to venture into the market.
With ongoing economic uncertainty, the BoC is likely to cut rates again in March, just in time for the busy spring season.
Have questions about the January 2025 interest rate cut? Contact me below for answers.
Wins Lai
Real Estate Broker
Re/Max Ultimate Realty Inc., Brokerage
m: 416.903.7032 p: 416-530-1080
f: 416-530-4733
a: 836 Dundas St W Toronto, ON M6J 1V5
w: www.winslai.com e: [email protected]