Newly built house prices fall for second month in GTA as homebuyers pressed the brakes

Newly built house prices fall for second month in GTA as homebuyers pressed the brakes

Rising interest rates and rising inflation prompted new homebuyers in the Toronto area to hit the pause button in April.

With the record price for a new single-family home falling below the February peak for the second month in a row, David Wilkes, CEO of the Building and Land Industry Development Association (BILD), warned of volatility in the housing market in the coming months.

The price of a new building, detached, semi-detached, or townhouse, was $1.79 million last month. Although that was a 28 percent jump year over year, the new benchmark is down $1.86 million in February and $1.84 million in March.

Wilkes said that price should be taken as a “grain of salt,” because it reflects the type and mix of homes available for sale in a given month.

“Rising interest rates are affecting the market, and being able to qualify at the benchmark rate ($1.79 million) for one family has become more difficult. The market is reflecting some changes in demand in the short term, which increases interest rate costs and that we have a residual impact from the pandemic,” he said.

Sales of single-family homes fell 47 percent year-on-year in April, putting sales 54 percent below the 10-year average, according to BILD data compiled by Altus Group.

Apartment sales were down 24 percent year-on-year and prices were down from March’s record $1.25 million. But the record price of $1.19 million in April remained 12.3 percent higher year on year.

Edward Gage, director of Altus Research, said new apartment sales last month would have been considered strong in a pre-COVID-19 world.

But he said, “The headwinds of high interest rates and high inflation are starting to act as a drag after an exceptional 16 months. Meanwhile, single-family sales continue to weaken as affordability issues persist.”

Wilkes cautioned that housing shortages remain the overarching issue in terms of affordability. He said it’s important not to be distracted by the short-term effects – not just price hikes but construction industry strikes, increased material costs and supply disruptions.

These short-term issues, both on the supply and demand side, will work in the market. This can’t be a reason to take our eyes off the long-term need to increase supply, so when we’re affected by these short-term shocks, we have a more balanced market that can absorb those shocks,” Wilkes, who was a member of the Ontario Progressive Conservative government’s Housing Supply Task Force .

However, the housing stock rose in April to 9,327 from 7,220 in March. In the most under-supplied single-family category, there were 1,391 single-family items in April, up from 830 the previous month.

“We have three months of inventory for one family, four months for apartments… We need more than that to have a stable market around this nine-month supply,” he said. The inventory indicates the number of homes available for sale at the end of the month, including pre-construction units, condominiums under construction and newly built condominiums. The number of months’ inventory indicates how long it will take to sell current inventory at the current sales rate.

“We are still not close to a balanced market and need to continue pursuing initiatives that will increase supply in the medium term.”

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2022-05-25 10:05:15

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