Demand for Toronto homes plummets but prices keep on climbing higher
Homes sales in the Greater Toronto Area (GTA) slowed to a trickle in February, but the cost of putting a roof over your head in Canada’s economic heartland only grew more expensive.
The Building Industry and Land Development Association (BILD) released its latest market data Thursday morning, revealing a pronounced decline in home sales the previous month in what weighed in as the second-worst February for regional market activity since tracking began in 2000.
Just 922 new homes were sold last month, marking a shocking 76% year-over-year decline and registering 69% below the ten-year average.
That figure includes just 225 single-family homes, including detached, linked, and semi-detached houses and townhouses, a 65% drop from the year before and 81% lower than the ten-year average.
A similar story played out in condo sales, with the 697 units sold last month marking a 78% decline from February 2022 and 61% below the ten-year average.
Edward Jegg, research manager with Altus Group, explains the dip in demand, saying that “As we move into spring, it appears that we may be seeing the floor in the market, which may overcome buyers’ recent hesitancy brought about by the run-up of interest rates and other economic concerns.”
But Jegg notes that homebuilders are already positioning themselves for the next surge in demand, explaining, “builders have been ramping up inventory, particularly in the new condominium apartment sector, in anticipation of a stronger spring market.”
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Seven new condo projects launched in the region last month, while new home inventory saw month-over-month gains to 14,621 units, the highest inventory recorded in the last two years.
Most of this inventory takes the form of condos at 12,031 units, with single-family homes far behind at 1,590 units. This represents just 9.3 months and 5.2 months of inventory, respectively, based on the last year of sales activity, though BILD warns that a balanced market should have nine to 12 months of inventory on hand.
BILD President and CEO Dave Wilkes notes that past inventory shortages appear to be resolving, saying, “housing inventory has been rising, which represents an opportunity for some new home buyers.”
However, Wilkes warns that “it would be a mistake to assume that we have overcome the structural challenges that hamper housing supply in the GTA.”
“All levels of government must work with industry to implement the changes necessary to meet the ambitious goal of building 1.5 million new homes in a decade, the number that Ontario’s Housing Affordability Task Force has called for to address the province’s housing supply crisis.”
The laws of supply and demand suggest that with decreased market activity and increased listings, there should be a corresponding dip in home prices. But this is Toronto, and things don’t always make sense, like the month-over-month increase in the benchmark prices for new single-family homes and condos in February.
The benchmark price for new single-family homes now sits at $1,759,043. Though this marks a price increase over January, the figure sits 5.4% lower than it did the previous February. Condo benchmark prices saw similar movement, increasing month-over-month to $1,113,164 but falling 5.5% year-over-year.