Things are looking up for the housing market in the Greater Toronto Area.
Sales of new single-family homes in January 2019 increased by 14 per cent from the same month last year, according to new data released by Building Industry and Land Development Association (BILD). Prices also dropped by 8.1 per cent over the last 12 months. The average price of a home is now $1,130,046.
The increase of new home sales is a promising sign for the market, which hit a 20-year low in 2018 with only 25,161 homes sold in the GTA. According to an Altus Group report, these numbers are the lowest on record since 1996.
“It looks like the market is starting to return to typical levels after a particularly difficult year,” said BILD President & CEO David Wilkes. “With the spring budget coming up, we are calling on the federal government to take steps to make it easier for first-time home buyers to get into the housing market.”
Despite the positive trend, it’s important to note that sales for new single-family homes — including detached, linked, semi-detached and townhouses — still fall considerably below the 10-year average by 53 per cent.
In comparison, sales of condos were only five per cent lower than the 10-year average, despite a 12 per cent increase in prices in the past year.
So what’s affecting the market? There are a few factors.
First, the mortgage stress test, which came into effect last year, has made it harder for prospective homebuyers to qualify for a loan. In fact, ahead of its introduction, an analysis by the Bank of Canada noted that 10 per cent of prospective buyers would become ineligible for a mortgage as a result of the test.
But first-time homebuyers aren’t the only people being affected by the stress test, according to Christopher Alexander, the executive vice president and regional director of RE/MAX INTEGRA’s Ontario-Atlantic Region.
“It has affected move-up buyers needing larger homes to accommodate growing families. It has created a frenzy in the rental market, since those who no longer qualify for a mortgage are opting to rent,” Alexander wrote in the Financial Post.
In addition to the stress test, fewer listings have also affected new home sales. BILD reports there has been a slight decrease in inventory from last month. There are currently 15,530 units (5,166 single-family homes and 10,364 condos) available across the GTA. This includes pre-construction, under-construction and completed properties.