Condos buck Toronto housing slowdown as new construction sales hit record Toronto builders maintain they have yet to see the slowdown happening in the existing home market, but some report investors and speculators might be out of the picture
Toronto-area builders say the slowdown that continues to drive the existing homes market in the region has yet to impact new construction with condominium sales reaching record heights in June.
The Building Industry and Land Development Association said Tuesday that high-rise, mid-rise and stacked townhomes made up 91 per cent of the 6,046 new home sales in June and were up 59 per cent from just May.
“The record number of condominium apartment sales in June was the result of a perfect storm’ of factors, said Patricia Arsenault, executive vice-president of research consulting services for Altus Group, which provides BILD’s statistics.
“These factors include: The sizeable number of units in new condo projects opened in May and June (over 8,500); demand from end-user buyers who might have preferred a single-family home but have adjusted their expectations due to lack of affordable supply; and heightened investor interest due to the rapid price increases for condo apartments in recent months.”
The continued buoyancy in new home sales comes amid a slowdown in existing home sales which were off about 37 per cent in June from a year ago, according to the Toronto Real Estate Board. Mid-month numbers released to agents showed average prices across the Greater Toronto Area are down about 17 per cent from an April peak set before Ontario moved try to rein in the market. Concerns about the housing market are even more heightened after the Bank of Canada raised its overnight lending rate this month which was followed by an increase in the prime lending rates at most banks from 2.7 per cent to 2.95 per cent.
Arsenault said historically the new homes market tends to lag the existing homes market. “We seem to have been in that situation recently, existing house prices took off sooner for single family resale homes and then they took off for new homes,” she said.
The average asking price for a new detached home did drop nine per cent in June from May to $1,761,985 but there has been very little product available in that segment of the market. Only nine per cent of all sales were low-rise last month with the average asking price for all low-rise units, including detached homes, $1,250,262. That average was up 2.2 per cent crease from May.
“When there is not much available, focusing on that differential up or down is not relevant,” said Arsenault.
On the condominium front, the average price of an available unit was $627,000 — a 34 per cent increase from a year ago and a 3.7 per cent bump up from May. The average price per on a per square foot basis was $742, up from $587 a year ago.
Robert Hogue, senior economist with Royal Bank of Canada, said new homes sales can be “kind of lumpy” because as larger projects open up they can impact the sales statistics dramatically.
“My concern about recent changes (from the Ontario government) is rent control,” said Hogue, referring to provincial policy changes that now affects all rental units and ties rental increases to inflation that are capped at 2.5 per cent annually. “I wonder what it will do to investors buying condominiums in the market. Those pre-construction sales could be sensitive to rent controls.”
Brian Johnston, chief operating officer of Mattamy Homes, said there are slightly fewer investors jumping into the market but end users are still buying. “We are selling houses. We just did a release (recently) and we were pretty happy. In the old days we would have sold out on Saturday (the first day of sales) now it’s a taking a few weeks to get through one of our releases. The investor/speculator seems to have disappeared.”