The interest rate induced slump in Toronto region real estate hit the new construction home market in August with condo and single-family housing sales plunging more than 80 per cent below last year’s levels and falling well beneath the 10-year averages.
Prices, however, continued to rise, according to a report from the Building Industry and Land Development Association (BILD) on Thursday.
The benchmark price of a single-family home, a category that includes detached, semi-detached and townhouses, hit about $1.86 million, 22 per cent above August 2021.
Condo prices jumped 11 per cent year over year, to a benchmark of nearly $1.19 million.
Low inventory and continuing constraints in the housing supply are maintaining high home prices, despite a pause in demand as consumers grapple with the rising cost of borrowing, said BILD CEO David Wilkes.
“In other markets where you have a weakening of demand, you often see prices come down. You’re not seeing that in the housing market because of the recognition that supply will have to increase in the medium and long-term to balance the market,” he said.
The 533 condos that sold in August represented an 83 per cent year-over-year drop and was 61 per cent below the 10-year average.
Only 89 single-family homes sold last month — 86 per cent below last August, and 87 per cent below the 10-year average. That was even less than the 97 single-family homes that sold in July, the first time since 2000 that fewer than 100 houses sold.
That’s when real estate research company Altus Group began tracking BILD sales and prices. The sales and price figures reflect the homes available to the market in that month, which can vary among different types and price points.
Wilkes said that new housing launches have slowed with demand.
As well as rising rates, the home construction industry is also facing what he called short-term challenges, including higher costs in everything from cement to steel.
Another development tracking market research firm, Urbanation, has said it expects 10,000 condo units will be delayed by developers due to declining preconstruction sales.
But there are also signs that some pandemic obstacles are fading. “Crews to get the homes and condos built are becoming available. We aren’t through the pause, but we are seeing signs of correction with respect to things like the supply chain,” he said.
Wilkes warned that the current slowdown is temporary, but it’s important that governments continue to address the long-term structural issue of housing supply.
As fewer housing projects launched for sale last month, inventory continued to decline leaving about three months of supply in the condo and single-family home markets in the GTA. A balanced market requires nine months to a year’s inventory of homes available to buy, according to BILD.
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