Has the housing market in Greater Toronto collapsed? In July, new home sales plummeted by 70%, and apartment sales plummeted by 81%!
According to a report by the Building Industry and Land Development Association (BILD), new residential sales in Greater Toronto reached a historic low in July, a 70% decrease compared to the average level of the past decade. Among them, apartments have dropped by 81%.
According to BILD's report on Wednesday, the sales volume of newly built residential properties in July was 654 units, a decrease of 48% compared to the same period last year and 70% lower than the average level of the past 10 years.
According to Edward Jegg, research manager at Altus Group, the official source of new residential market data for BILD, new residential sales in the Greater Toronto Area hit a monthly low again in July 2024, as buyers are still unwilling to enter the market.
Due to the continuous decrease in sales, the total inventory of newly built residential properties increased in July. There is currently 15 months of inventory in the market - the time required to sell out this inventory based on current demand.
Justin Sherwood, Senior Vice President and Head of Communication and Stakeholder Relations at BILD, stated that the increase in inventory is not due to the addition of more units, but rather due to a decrease in sales. The significant decrease in pre-sales has led to the suspension of construction projects, which will result in future shortages.
Sherwood said that this is accumulating unmet demand because when interest rates fall, people will return to the market. The recovery of new residential construction will take longer, which will result in an imbalance between supply and demand.
Many new construction projects may have to wait until the inventory in the second-hand market decreases before restarting, and the second-hand market is also overstocked due to a decrease in buyers caused by high interest rates. When housing supply is limited, consumers usually pay attention to pre-sale projects.
All types of new apartments sold a total of 287 units in July, a decrease of 67% from July 2023 and 81% below the average level of the past 10 years.
In July, 367 single family homes were sold, a decrease of 1% compared to the same period last year, but 42% lower than the average level of the past 10 years.
Sherwood said that the performance of single family homes is slightly better. Part of the reason is that there is a large inventory of apartments in the second-hand market. Consumers have many choices, which need to be gradually digested.
The Bank of Canada has started to lower its benchmark interest rate, with two consecutive cuts this summer and economists predicting two more cuts by the end of the year. Although this will contribute to some market activity, the report suggests that governments at all levels may need to take more proactive measures.
In the report, Sherwood stated that these data clearly demonstrate the issues that the government needs to urgently address. The change in interest rates cannot solve the persistent structural problems, especially in the Greater Toronto Area. The construction cost is too high due to excessive government fees and taxes. If the government does not take immediate action, new construction activities will continue to slow down, and the housing shortage in the Greater Toronto Area will reach unprecedented levels in the coming years.
Source link: https://www.thestar.com/real-estate/toronto-area-home-prices-drop-in-july-as-real-estate-listings-pile-up/article_74153d62-4fb4-11ef-8bd7-a7b5584ef74e.html