Sales for new homes in the Greater Toronto Area (GTA) plummeted in August, and the steep drop-off in demand is a worrying sign of things to come as the effects of economic uncertainty on the housing market become clearer.
The GTA new home market slid in both the number of sales and inventory levels in August, falling well below ten-year averages, the Building Industry and Land Development Association (BILD) announced on Thursday.
Only 533 new condominium apartments were sold region-wide in August, the number representing an 83 per cent dip below the sales figure for August 2021, and falling 61 per cent below the ten-year average.
Even fewer new single-family homes (including detached, linked, and semi-detached houses and townhouses) were purchased during the month, with just 89 homes marking a staggering 86 per cent year-over-year decline, sitting 87 per cent below the ten-year average.
“New home sales for August slowed in both the condominium apartment and single-family sectors as buyers and builders are in a wait-and-see mode amid the swirling economic uncertainty,” said Edward Jegg, Research Manager at Altus Group.
The decline in transactions was accompanied by a drop in available inventory, with 10,412 units on the market in August. Inventory is mainly accounted for in condominium units, with 8,787, compared to 1,625 single-family lots.
BILD warns that this only represents 3.5 months and 2.7 months of respective inventory, compared with the 9-12 months of inventory expected of a balanced housing market.
The only numbers that actually increased in August were prices.
Benchmark prices for new condominium apartments surged 11.2 per cent year-over-year in August to $1,189,682, while single-family home benchmark prices grew by 22.3 per cent in the same period to $1,861,587.
“New home buyers and builders have taken a step back in the face of rising interest rates and inflation,” said Dave Wilkes, BILD President & CEO. “A useful parallel is the year 2017, when the introduction of the mortgage stress test resulted in artificially elevated interest rates.”
Of course, there are many differences between 2022 and 2017. The market has had to endure lockdowns and a major economic downturn, an urban exodus due to the rise of remote work, and most recently, rampant inflation and further uncertainty.
That “soft landing” that experts have been talking about for roughly a decade seems to have turned from a likely outcome to a remote possibility, and the market’s future seems much more turbulent than it did in that “useful parallel” year of 2017.
Recent challenges have experts now throwing around words like “crisis” and “hard landing,” a situation current and prospective homebuyers will be keeping a close eye on.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
