Real estate: Toronto still defying gravity

Housing starts and new home prices out this morning

For a while, Canadian builders seemed not to notice that “for sale” signs on people’s lawns were lingering there longer than usual. Sales of existing homes took a dive in September, dropping 15 per cent compared to the same month last year. New residential construction projects, though, were still holding up. No longer. The numbers released today by the Canada Mortgage and Housing Corporation seem to indicate that developers have finally gotten the memo: the market is cooling. There were 17,507 actual housing starts in October, according to the CMHC, which translates to an annualized 204,107 starts—down significantly from 223,995 in September and below the 2012 average.

Now, in a sense, this is of course bad news: it shows that the housing market continues to weaken, which will likely weigh on the entire economy. But in a glass half-full reading of the data, it is also a sign that oversupply problems are likely easing.

Unless, that is, you’re in Toronto. “The monthly decrease in total housing starts posted in October was mostly due to a decrease in both single and multiple starts in urban centres in Quebec and the Prairies. Multiple starts also declined in many urban centres in Ontario, more than offsetting an increase in such starts in Toronto,” Mathieu Laberge, deputy chief Economist at CMHC, said in a statement. The condo building frenzy in Ontario’s capital, in other words, isn’t over yet.

Toronto also defied another housing statistic out this morning: Statistics Canada’s New Housing Price Index. According to the agency, prices of new homes in Canada rose for 18th consecutive month in September, edging up 0.2 per cent compared to the same period last year. The index does not include condo prices, which have been slumping in Toronto. High rises aside, though, the Toronto-Oshawa market is still far in front of all other metropolitan areas:

*Source: Statistics Canada.




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Real estate: Toronto still defying gravity

  1. Market is slowing down and soon new home builders will have to bring their prices down to sell their units.. About time for the sky high market …

  2. I’m a residential realtor in the GTA, and when this perspective suggested again – it was incumbent that someone reply who has industry knowledge.

    Are residential real estate prices in Canada really in decline – NO. What is happening – well, it is pretty straight forward when all the numbers are considered, instead of the one’s that only support the perspective of this article. This information could hurt a tremendous number of Canadians employed by the residential real estate market. There is a story about the market slowing down in Toronto – but it isn’t the one that is outlined.

    The real story is clear: the number of properties sold to-date are down substantially from same time last year, especially in the GTA. However, closer examination shows that the number of available properties for sale is also dramatically down. So what we have is a market where inventory is low and demand is strong.

    Why is this happening – Canadian banks don’t lend money to residential builders without the builders having a substantial number of units pre-sold in a new residential community. Plus, builders don’t want to have extra inventory. Also securing a mortgage from a retail bank is far harder with the new rules they have to follow. Take a look at the line up of buyers for every new development put up in the GTA. It hasn’t stopped – and a very small percentage of those buyers are investors. When the US housing market collapsed, investors made up more then 20% of all buyers – in Canada we are under 5%.

    Now who are these investors and why are they investing in Canadian real estate. There are a couple of reasons. The Canadian political and economic climate was one of the few stable countries after the crash. People with a great deal of money want to protect and better still grow what they have. Toronto has and is now a world class city, and from that perspective our prices are low. Just compare Toronto housing prices with Paris, New York, Hong Kong, London, Berlin, & Tokyo. It becomes apparent that Toronto is still very affordable. Real estate is also one of the few things that investors can buy that is tangible. The stock market has been on a roller coaster ride for years – most investors don’t like roller coaster rides. So from stability and political perspectives Canadian real estate is an excellent investment.

    So who are the people hurting. For the most part they are young realtors who thought that real estate was a quick way to get rich. With less inventory – there are less sales and with less sales there is less commission. Older realtors are not retiring from the business – because their portfolios took a noise dive after the stock market and housing crash. They no longer have the same resources for their retirement they had planned for. With their experience – they have the ability to land new business at an easier rate. Finally, one would think that the construction trades would be hurting – but if you have ever called a plumber, electrician, or contractor to come over – you soon find out that they are so busy they don’t know what to do with all the business. Finally, there are the first time buyers – who are finding it harder and harder to find accessible financing or inventory.

    The GTA’s residential real estate market is healthy – thanks in large part to our banks and smart builders. This is what history has taught us; however, what the future holds is anyone’s guess. I don’t have a crystal ball – but neither does anyone else. So many things influence residential real estate prices. So if you are planning to purchase a residential property – buy what you know you can afford, and deal with a realtor you trust.

  3. Time to sell if you have a condo in Toronto. Too much speculation and foreign money seems to be the only thing propping up prices these days.

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