Toronto

Greater Toronto New Home Sales Fall Faster Than Inventory, Releasing Price Pressure

Greater Toronto’s new homes are on a rollercoaster, going from boom to bust, back to boom, and now… it’s interesting. BILD GTA data shows new home sales are cooling fast in May, especially when compared to earlier this year. Inventory was still tight for the month, but a lot of pressure has begun to release. As this pressure eases, so will the pressure for new home prices to rise. 

Greater Toronto New Home Prices Are Up A Lot, But Detached Homes Fell Over $14,000 In May

Most of you can probably guess this one, but the price of a new home across Greater Toronto is higher. A lot higher. The benchmark price for single-family homes is $1,380,491 in June, up 24.4% from a year before. For apartments, the typical price reached $1,063,973, up 8% over the same period. Not much of a base effect either, which makes the climb meaningful.

The direction of growth is mixed though, with single-family homes slowing. May’s annual rate of growth for single-family homes fell 0.4 points from a month before. Prices just shaved off $14,700 over the span of a month. It’s not a whack relative to the gains, but shows it’s down from the peak rate seen earlier this year.

Condo apartments on the other hand actually saw an increase in the rate of growth. The rate for this segment saw an 0.5 point acceleration from the month before. Sort of the same thing seen in the existing-home market, where condos are picking up steam.

Greater Toronto New Home Sales Are Lower Than Usual

The total number of new home sales are rising to a more sustainable level, after last year’s numbers. New home sales came in at 3,661 in June, down 21.1% from a month before. It works out to a climb of 312.3% from a year before. The annual change doesn’t really mean a whole lot though.

Greater Toronto New Home Sales

Total new home sales in Greater Toronto for May.

Source: BILD GTA; Altus Group; Better Dwelling.

Last year, the pandemic artificially lowered new home sales for a few months. Skipping over it, and looking at the year before might provide better context. Compared to May 2019, new home sales are 20.1% lower this year. Also an important note, it’s been typical of new home sales to rise from April to May, not fall. 

The City of Toronto Is Bucking The Trend, With New Sales Rising

In the City of Toronto, new home sales are looking stronger than recent data. Toronto represented 1,615 of the new home sales in May, up 16.0% from the month before. Compared to May 2019, home sales are 15.2% higher this year. Existing home sales have been seeing almost the opposite, so this trend is worth keeping an eye on.  Either because existing home sales in the city will rise, or new home sales will slow further.

Greater Toronto New Home Sales

Total new home sales in Greater Toronto for May, by region.

Source: BILD GTA; Altus Group; Better Dwelling.

Greater Toronto New Home Inventory Is Loosening

Greater Toronto’s new home inventory is still tight, but pressure has been releasing. The sales to active listings ratio (SALR) fell to 29.2% in May, down from 43.6% in March. It needs to fall below 20% before the market is considered balanced though. Until then, pressure on prices remains slanted towards them climbing. Maybe just at a slow rate of growth though.

Greater Toronto New Home Sales To Active Ratio

The ratio of sales to active listings for new homes in Greater Toronto.

Source: BILD GTA; Altus Group; Better Dwelling.

There are two ways to look at the new home data for May. New home sales have recovered from last year’s brief pandemic-related lull. Then there’s the market cooling from peak activity this year. It’s not typical of the season either, which means it may be part of a bigger trend at play. Demand was pulled forward and borrowed. How much of the future homebuying demand was borrowed is the big question.

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6 Comments

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  • Reply
    Jason Chau 2 months ago

    When the government (Vaughan) said prices can’t fall because of new home sales, he meant it’s because people don’t have the full amount as a downpayment to purchase a home. They’re putting a little down, and hoping accrued equity helps cover the costs. If these puppies roll back even a little, or stay at the same price, it becomes problematic for buyers to close.

    That’s the additional income they’ll have to remove from their spending in the economy and pump back into housing.

    • Reply
      D 2 months ago

      >believing what a government tells you
      In reality all home prices will crater from the incoming deflation brought about by increased interest rates. The US is going to do it so Canada will also do it. The Federal reserve has already earmarked for the elites that they’ll begin raising rates in 2023 which gives the elite enough time to pass on the hot potato of real estate, stocks, crypto, collectibles, metals etc..to make profits of course.

  • Reply
    Trader Jim 2 months ago

    Maybe the rise in prices is transitory as well, if detached homes are dropping $15k across all types as well. The funny thing about the inflation narrative being transitory is it’s also the housing narrative being transitory.

    Cheap money inflated prices for a short period, and as the BOC tries to get the numbers under control by letting treasuries roll off the book, they’ll pull demand for housing back. If they don’t get it under control over the next few months, they’re going to have to push the operating costs of government labor much higher.

    That makes their books permanently weakened, and I don’t think they’re dumb enough to do that.

  • Reply
    Pepp 2 months ago

    Hmmmm, the whole world printed tons of money in the last two years. There is no mechanism to absorb these new cash, the total excess money supply is still there.

    This is due to the new stress test, nothing fundamental. But Toronto and Vancouver are way over priced and in bubble state. But other cities will continue to climb.

  • Reply
    Kolf 2 months ago

    My question is if 1.3 million immigrants come will that inventory be enough?

    Yeah, exactly you need to look long term.

    • Reply
      RW 2 months ago

      You know immigrants don’t just keep coming if home prices are higher than the income they can earn, right? That and by 2030, the places with the most immigrants are projected to be much larger and developed economies than Canada.

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