The once scorching hot Toronto new home market continues to cool. BILD GTA, a trade group representing GTA home builders, numbers show prices slipping in February. The slip wasn’t large, but combined with rising inventory and falling sales could get worse soon. Last month was the fewest sales for the month of February since the Great Recession.
Greater Toronto New Home Prices Slip
New home prices slid, but condo apartments did better than detached homes. The benchmark for detached homes fell to $1,122,682 in February, down 1.82% from the month before. This represents an 8% decline when compared to the same month last year. Detached home prices peaked in early 2017, and are now down over 13% from the all-time high.
Greater Toronto condo apartments slid lower last month, but are up from last year. The benchmark for a new condo apartment fell to $792,709 in February, down 0.51% from the month before. Prices are still up 8.6% when compared to the same month last year. January was the all-time high for the benchmark.
A small note on the Altus new home benchmark. The Altus benchmark uses the asking price of all new homes offered for sale. In contrast, benchmarks typically use sold data – like the CREA or TNB HPI. In a booming market, there’s likely little difference between the sold and ask price. In a slower market, that might not be the same. More developer upgrades, discounted financing, or even cheaper non-market units become more common. This is not reflected in the price, so the numbers are better suited for sentiment than pricing.
Fewest Toronto New Home Sales Since 2009
The number of new home sales across Greater Toronto fell to a multi-year low for the month. There were 1,411 sales in February, down 33.14% from last year. This represents the fewest sales for the month since 2009. Breaking that down by segment, we can see that condos are starting to show more weakness.
Greater Toronto New Home Sales
Total February new home sales in Greater Toronto.
Source: Altus Group, Better Dwelling.
The number of new single family homes sold in Greater Toronto is actually higher than last year. There were 639 single family homes sold in February, up 146% from last year. That sounds great, until you realize 2018 sales fell 55.9% from the year before. In fact, February 2018 was the slowest for the month since at least 2005. The increase is good, but not quite the sign some might mistake it for without context.
Greater Toronto New Home Sales
Total new home sales in Greater Toronto for February, by region.
Source: Altus Group, Better Dwelling.
Condo apartment sales across Greater Toronto fell to the lowest level since the Great Recession. There were 772 sales of condo apartments in February, down 58.4% from last year. This February is also down 72% from 2017’s numbers as well, indicating a trend of lower sales. In fact, last month was the fewest February sales since 2009, a decade ago.
Toronto New Home Inventory Continues To Rise
New home inventory continues to rise across Greater Toronto. There were 11,269 homes for sale in February, up 6.26% from the month before. This represents an increase of 21.36% from the same month last year. The number is also 8.96% higher than February 2017. The number is the highest level for February in at least 3 years.
Falling sales and rising inventory pushed the sales to active listings ratio (SALR) lower. The SALR fell to 8.55% in February, down 47.96% from the year before. The market is considered a seller’s market when the SALR rises above 20%, and prices are expected to rise. It’s a buyer’s market when the ratio falls below 12%, and prices are expected to fall. The market is balanced when the ratio is between 12% and 20%.
Greater Toronto New Home Sales To Active
The ratio of sales to active listings for new homes in Greater Toronto, for the month of February.
Source: Altus Group, Better Dwelling.
Greater Toronto new home prices aren’t doing bad, and condo apartments are doing well. The price movement isn’t in line with the shift in fundamentals however. Less than 1 in 10 new homes being absorbed at current prices, showing soft demand to support it at these levels. With sales continuing to fall and inventory rising, the odds of prices staying the same are dropping.
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> Less than 1 in 10 new homes being absorbed at current prices
Key takeaway. What are buyers willing to pay for the next 9 units? Probably not more is my guess.
Push that further. Of the 1 in 10 buyers, how many are final end users vs how many people still think they can flip the home to young people for 30% more? I’m still surprised when I head people discussing their “forecasts.” Flatish is 5% according to someone else the other day.
It was unseasonably cold in February. Sales slow down is not a big deal.
How does unseasonably cold impact condos, but not single family homes?
Take your time with the answer, I actually want to know what goes through your mind when people say things like this.
Obviously condo buyers aren’t as resistant to cold as single-family buyers.
Condos are tall, and so you experience more wind chill.
It was so cold this February it only had 28 days!
It’s also a benchmark – so it’s seasonally adjusted already!!
Seasonally adjusted with a positive bias for winter.
This must mean HELOC loans are going down as well.
There’s some truth to that, but I thought it had to do with the implosion of MICs and the fact that more brokers are turning away from that market.
Has anybody noticed all the resales of new builds outside of the 416 area that are all up for sale- none of them look like they have been lived in… nice staging. Speculators get ready. Let the collapse begin!
Definitely noticeable. Single-family units were also probably bought at a discount too. They’ll underbid the current resale inventory soon is my guess.
I see quite a few new detached homes in the 1.2 – 1.7 Million dollar range in Aurora and Newmarket, never lived in and not for sale. Driveways are not cleaned in winter and flyers pile up at the door year round. Someone comes to clean up once a month or so. I assume its parked money. Its been like that for more than two to three years since the development was fully occupied.
There are also homes in my older subdivision that were resold in 2016 through early 2018 but never occupied since then. Percentage wise the figure is likely very small, but I do see unoccupied homes for long periods of time. This not to be confused with snowbirds…they’re usually only gone for 3-4 months.
Its weird seeing non-dilapidated homes, just sitting empty.
That is a interesting observation SUMSKILLZ . There seems to be more than ample supply of new homes out there… just not for sale yet. But it’s coming! Warning to speculators the exit door is very small when everyone is rushing to it.
New government loan scheme is going to mean it’s going to be a loooong summer for developers. Why buy a unit today, if the government is going to put up 10% of the capital without interest, and you capture the whole upside?
Easy, developers don’t release inventory until the new home loans are available. Tight inventory for the summer, and more pressure on prices.
Because not everyone wants the government to own 10% of their home, take 10% of the resale, and not kick in 10% of the maintenance?
The loan is interest-free, but you pay for it through other means.
That $150,000 home reno you did? The government takes 10% of the value-add from it at time of sale.
We don’t need money hand-outs. We need lower prices.
We per say dont need the hand outs, but the developers do. Do you actually think the government is doing this to actually help out the average Joe? Smoke and mirrors.
Considering it looks like the current government is going to be voted out this CMHC scheme will likely be cancelled before it even starts.
It will do nothing for builders in GTA/Vancouver! Will also not affect prices. It’s still all heading south.
Could luck finding a new build for 480,000$ or under? It’s the max price that the gov’t will accept in shared-stupidity, I mean shared-equity.
wait until all that parked money starts moving again. more houses on the market due to declining home values…drives prices even lower.
I’m struggling to find a move in ready semi downtown under $1.5-$2M
Inventory is so low… hoping to see more this spring.
I sold in October and have been waiting for a deal.. but prices aren’t coming down at all downtown.
So you’re a speculator?
You had something, and sold it to try and sell-high, buy-low?
You sir, are part of the problem, and a prime example of why houses should not be allowed to act as investments.
John, I disagree that Gregory is part of the problem. It sounds like he sold to crystallize the monopoly money into cold hard cash.
If you’re suggesting you would fall on your sword for the greater good, I’ll guess you have not had opportunity to do so.
The problem is not the person selling, it’s the system that supports insane pricing.
We saw a lot of FOMO from the buyers in the past years… Now, there’s recently a lot of talk in the main stream media about recession. Whether we’ll have a recession or not, will be interesting to see if FOMO works the other way as well!
Sam, it does work in reverse, but the fear will be about losing there shirts (FOMO becomes FOLS). Watch for all sorts of creative opportunities to acquire properties in the next few years.
Old school stuff like Vendor Take Back Mortgages, deferred balloon payments, shared payments, whatever will help relieve the stress on the seller, especially if they were speculators with a stock of empty depreciating assets, with property tax and maintenance accruing.
The big developers with acres of empty new houses will be the most aggressive because the margin on the houses they build is massive.
I know I’ll get blow back on the margin statement but time will tell. Hang in there Gregory.