Toronto

Toronto New Construction Prices See The Worst July Since 1993

Toronto New Construction Prices See The Worst July Since 1993

New construction prices are dropping fast. Numbers from the Canada Housing and Mortgage Corporation (CMHC) show that new construction sale prices in Toronto have declined by various measures. Interesting enough, sales in July 2017 haven’t actually slowed down.

Source: CMHC.

Median Price of New Construction In Toronto Declines Over 20%

The median price of new homes and condominiums sold has had a massive drop in Toronto. The median price fell to $675,000, a 20.59% decline from the month before. This also represents a 12.34% decline from the same month last year, the largest annual decline for a July since 1993. This brings the median price back down to January 2016 levels.

Source: CMHC.

Average Price of New Construction In Toronto Declines 17.3%

The average price for new construction sales are also falling across Toronto. The average sale price fell to $862,878, a 17.3% decline from the month before. This also represents a 29.9% decline from the same month last year. Average prices aren’t great for determining sale prices, but they are useful for determining where dollar volume is concentrating (i.e. people are upgrading or first-time buyers are running the market).

Source: CMHC.

Sales of New Construction Are Flat From Last Month

One of the most interesting numbers was the number of new construction sales, which were actually up… a lot. July 2017 saw 1,208 sales, basically flat from the month before. This is still a huge jump of 75% from the same month last year. The number of units sold in June and July 2017 are actually at a high not seen since November 2013, when 1,233 units were sold.

Source: CMHC.

The sales numbers actually put these declining prices into perspective. Lower prices and higher sales is somewhat paradoxical to traditional supply and demand economics. Afterall, if you’re selling more units, why discount them at all? This means one of two things in my opinion, less affluent buyers are making the majority of new construction purchases right now, or they’re being sold to investors.

Less affluent buyers, like first-time buyers, are usually the last large group of real estate buyers in an uncertain market. Those that are well heeled don’t necessarily feel the need to chase the market, so they’ll take a pause when things are too expensive (i.e. the flood of high-level bank executives that sold their homes last year). First-time buyers worry that this is their last chance to get into the market, so they tend to hit the market whether they’re ready or not. This leads to a flood of lower priced units flying off the shelf.

The other possibility is a shift to investor grade units. Not the kind of “investor” that leaves them empty and treats them like gold bars, like in Vancouver. The kind of investor that has the intention of becoming a landlord, looking for a smaller place to rent to new tenants. With overseas marketing ramping up, boasting of units with guaranteed cap rates, this is a very real possibility. Anecdotally, Toronto realtors have also been telling us that Boomers are looking for investment condos, to keep cash flow coming in through retirement.

The decline in new construction prices while sales are ramping up is slightly confusing. The takeaway is that high-end and mid-ranged buyers aren’t demonstrating significant demand. We’ll have to wait and see if more affluent buyers have paused because they believe recent policy changes will drop real estate prices, or if the Toronto housing market has lost a little steam.

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11 Comments

  • Reply
    dana 3 months ago

    all the charts above show “ceiling” formation; I get the feeling that the March peek was a “head fake”

  • Reply
    Newbie 3 months ago

    Market is finished even realtors know that….but As developers and realtors were saying Market will go up again in August and September and even in January 2018, which didn’t happen so far!

    They are now trying so hard to create hype (there are some articles and you tube videos) about the market going up!!! They are trying to create panic among buyers!!!

    I just want to say….don’t panic…keep patience!!! You have waited so long so just some more time.

    Remember- Real estate markets usually don’t crash overnight. Even the one is US took couple years!

    • Reply
      Real2real 3 months ago

      Haha you are everywhere just dying for a collapse cutting and pasting comments

  • Reply
    Justin Thyme 3 months ago

    If developers can’t keep the prices high, you KNOW something is happening.

    Even in a slow market, developers hold the price and add ‘free’ features (appliances, upgraded kitchens and bathrooms, landscaping) that can be taken off later when the market improves, making it a better value for the same money.

    They don’t go to lower-profit units unless absolutely necessary.

    Or have they found a way to get higher profits out of lower value homes than higher value homes?

    A $100 profit on a $500 sale is better than an $80 profit on a $1,000 sale.

    • Reply
      Rafael Frost 3 months ago

      I’m reading about the decline in property prices and I’m surprised. Because of the high cost of apartments in Toronto, I bought an apartment in the old house. I spent a lot of money on repairs and contractors. First, I had to change all locks and installing security systems. The contractors from a company MatrixLocksmith gave me a good discount – https://matrixlocksmith.ca/. But the total sum was lower the cost of the new apartment. Here again the news that prices are falling. Did I make a mistake when I bought an apartment in the old house?

  • Reply
    Real2real 3 months ago

    It’s gonna crash!!!! Ahhhhh! Hold on everyone!! Lol that’s what all these entitled losers want to hear

  • Reply
    Brian 3 months ago

    I have given up on buying a condo to move to from the house I currently own. Condo prices have become too expensive for their “value” compared to houses, especially semis, or townhouses, which share walls like condos do but have front and backyards and basements, etc., and no uncontrollable escalating monthly fee, boards which impose rules and levies, utility expenses not included in the monthly fee, restrictions on what you can do and when to your condo, etc. I will either renovate my existing home, possibly adding an income producing portion, or sell and rent an apartment/condo instead. If I rent, the income from what I net from the sale of my house will help with that and, when interest rates increase, that income will increase and help more. When interest rates increase, mortgage affordability will decrease and condo prices will decline and I will be ready to buy one and live in it if it makes financial sense then.

  • Reply
    Terri 3 months ago

    Boomers have already cashed out and can no longer afford higher prices of new developments due to the market. Those who have bought and are stuck with 2 mortgages will be forced to rent out one. Developers need something so they have been not been increasing their prices. No one buying a new detached has been a first time buyer even up to Barrie! Most “investors” of the past year have been flippers. Now that the market has decrease they are FORCED to be landlords.

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