Continuing with July’s trend of increased home sales from the year previous, August has proven to be a busy purchasing month. The Building Industry and Land Development Association (BILD) and Altus Group – BILD’s source for housing market data – announced today that there were 1,400 new home sales in August.
While the stat reflects a 19 per cent increase from August 2018, it’s still 23 per cent below the 10-year average. This could partially be explained by the GTA housing market’s general affordability problem.
It’s been over a decade of inflated home prices for Toronto. The phenomenon has locked millions of would-be homeowners out of the market, most notably the millennial cohort.
This is due to the high house price-to-rent and house price-to-income ratios. With decreased housing opportunities, renters and buyers are feeling the pressure. Currently in Toronto, to purchase an average home at around $873,000, a buyer would have to earn within the top 10 per cent of local incomes. That would mean you’d have to be earning a whopping $125,000 to afford a typically-priced, non-luxury home.
For this reason, many young people are turning to purchasing condos instead of houses. BILD reported that condos in various types of buildings, from low rise to stacked townhouses and lofts accounted for 961 new home sales, down 4 per cent from August 2018 and down 12 per cent from the 10-year average.
“August was the first month since March that new condo apartment sales didn’t exceed their 2018 level,” said Patricia Arsenault, Altus Group’s Executive Vice President, Data Solutions. “Typically very few new projects open in August and this year there were actually none – this played a role in the slightly lower number of new condo sales compared to August last year.”
Other contributing factors are new actions from the Canadian federal and provincial governments. The Foreign Buyer’s Tax has caused a big drop in real estate purchases. Also, the 2018 mortgage stress test has also slowed purchases across the country.
That becomes terrifying when you start to examine what a similar price point might get you in other jurisdictions. Now with Shah’s prediction, these discrepancies between communities might show signs of improving.
RBC’s senior economist Robert Hogue says he has “seen a bit of cooling off” in both the Vancouver and GTA markets, noting that a gradual price shift is better than a dramatic one.
There was also significantly less condo inventory in the GTA, with many developments remaining in pre or mid-construction mode.
What shocked market analysts was that single-family home sales (including 439 detached, linked and semi-detached houses and townhouses sold this past month, showing a 14 per cent increase from last August. That’s still down 39 per cent from the 10-year average for August sales figures.
“New single-family home sales outpaced year-earlier levels for the 10th month in a row in August,” said Arsenault. “But the level of sales remains low in historical terms, with affordability of available product an issue for many would-be buyers.”
Unbelievably, the average price of new single-family homes in the GTA hit $1,083,358, a price 4.1 per cent lower than the average sales price listed over the last 12 months. The benchmark price of new condominium apartments was $840,799, up 7.2 per cent over the last 12 months – which might explain the lack of condo sales this August.
“It is encouraging to see sales of single-family homes increase as the market returns to more typical levels,” said BILD President & CEO David Wilkes. “However, we still have concerns that until fundamental adjustments are made to align supply with demand in the GTA housing market, we will continue to have affordability challenges.”
Hopefully the upcoming federal election will encourage party leaders to provide some solutions to a market in the midst of an affordability crunch.