It seems as if the real estate market in Toronto is starting to slow down, making it the second slowest January since 2009. Only 4,009 sales were recorded in the month and the price of the typical home dropped minimally to $761,800. With headlines like “Only 1 In 10 New Homes In Greater Toronto Were Bought Last Month” and realtors predicting that home prices could return to the 2017 peak, it’s the perfect storm for a cooler market.
Higher Costs For Condos Are Not Helping The Economy
As the home sales plunge, unsold condos are piling up too, partly due to the lack of demand from investors who usually represent the biggest component of new condo purchasers. The Toronto Real Estate Board (TREB) reports that the average price of a Toronto condo is approximately $506,900 in January, up 8.04% from last year. Due to the increase, sale levels have fallen the most they have in four years.
Because of this, new builds have a higher volume of condos on the market unsold frustrating those attempting to sell, as recently buyers were once flocking to condominiums as a less pricey alternative.
“The market is out of balance,” said David Wilkes, president and chief executive officer of the industry group BILD. “We join other industry groups in calling on the federal government to revisit the stress test and allow a longer amortization period for first-time buyers. And we look forward to working with our municipal partners on removing barriers to development such as excessive red tape and outdated bylaws.”
Wilkes sentiment is echoed by the TREB who is calling Parliament to revisit the mortgage stress test that was implemented in 2018 which forces homebuyers to qualify for monthly mortgage payments that are nearly $700 more than what they really pay.
Greater Toronto New Home Inventory Rises Over 38%
Like condos, the home inventory is beginning to rise as well, many buyers looking to older homes as still expensive yet actually attainable options for housing. What’s worrisome is that a recent report conducted by The Richards Group forecasted the cost of a detached home in Toronto could reach a Vancouver like sale price of $3.5 million by 2026.
At the end of 2018, new homes sales were preemptively cold, falling 7%. These 940 sales equalled a whopping 67% lower than in 2017.
Looking To The Future of Real Estate in 2019
A lot is up in the air in terms of the real estate market in Toronto, but many are feeling hopeful for the rest of 2019. “As we look to 2019, the major battle lines seem fairly clearly drawn, with the market still supported by strong population growth on the one side, and challenging affordability (past price gains and rate rises) on the other,” said Doug Porter, chief economist at BMO Economics in an analyst note to Financial Post. “While we expect sales activity to stabilize [in 2019]… we nevertheless anticipate that prices will slow even further to gains likely below that of inflation.”