In a normal year, the fall would be one of the busiest seasons for the real estate market. But as inflation and interest rates continue to remain high, new home sales in the Greater Toronto Area (GTA) have been underperforming.
A new report from the Building Industry and Land Development Association (BILD), compiled based on market intelligence from Altus Group, found that September sales of new homes in the GTA were "very slow," falling well below the 10-year average.
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“September new home sales were quite low,” said Edward Jegg, Research Manager at Altus Group. “However, inventory rose as builders brought more condominium apartment projects to market.”
New condo apartment sales were down a staggering 89% year over year. Between low, medium, and high-rise buildings, stacked townhouses, and loft units, just 289 condos were sold in September -- 84% below the 10-year average.
Single-family home sales fell even more. With just 45 units sold (including detached, linked, semi-detached, and townhouses) these sales sat 96% below both where they were at the same time last year and the 10-year average.
But as sales slumped, inventory levels began to inch upwards across the GTA. September saw the number of new homes on the market jump up from the previous month to 11,900 units. Of these, 10,291 were condo apartments while 1,609 were single-family lots.
Although there was an increase in inventory, it was not nearly enough to bring the GTA home market into balance. September's inventory levels represented 4.4 months' worth of condo inventory and 3.1 months of single-family inventory. A balanced market would have between nine and 12 months of inventory, BILD notes.
Despite markets across the GTA experiencing falling home prices as demand plummeted due to rising interest rates, benchmark prices for new homes are still up on an annual basis. The benchmark price for new condo apartments in September sat at $1,159,455, up 11.8% over the last 12 months. Meanwhile the single-family home benchmark price came to $1,853,214, which is a 17.8% increase from the same time last year.
According to BILD President and CEO Dave Wilkes, this sustained growth is due to the fact that new home builds have been subject to inflationary prices during the building process. Selling at a lower price more in line with the ongoing market correction could mean selling at a loss to the builder.
“Monetary policy and rising interest rates have stalled the market,” Wilkes said. “Inflation in construction and labour costs, elevating government fees, taxes and charges and tight supply make significant price correction for new homes very unlikely. The solution remains significantly adding supply to the market and this requires a wholesale change to the way we regulate, tax and deliver new homes to the residents of the GTA.”
