Greater Toronto real estate is barely recognizable after the sudden market shift. Altus Group data shows new home sales plummeted in June, with no single-family homes sold in the City. Not one. At the same time, inventory made a small climb but a big improvement with falling sales.
Greater Toronto New Home Sales Are Plummeting
Greater Toronto new construction demand has plummeted over the past few months. Only 175 new single-family homes were sold in June, down 85% from last year. Condo apartments fell to 1,519 sales, down 44% over the same period. Higher rates have throttled demand, especially amongst investors.
New home sales in the City of Toronto were hit hardest. Not one single-family home sold in the City, down from 13 last year. In contrast, the February madness saw 45 single-family units bought in the City. Condos did a little better with 717 units sold, down 16% from last year.
Greater Toronto New Home Inventory Is Rising, But Falling Demand Released More Pressure
Greater Toronto new home inventory is rising considerably. There were 11,639 units for sale in June, up 1.6% from last year. It’s not a huge increase, but plummeting home sales reduce competition (and stress) on supply.
Pre-construction inventory has climbed sharply from record lows just a few months ago. There were 6,256 pre-construction units for sale in June, a 46.2% increase from the December 2021 low. It’s a recovery and close to 2018 levels. Still a long way to hit 2019 levels, but it’s getting there.
The big story, and reason for plummeting demand, is the sharp rise in rates. Having a market flooded with practically free money boosted demand, especially amongst investors. Rising rates makes it more difficult to make a profit, and we know investors have been a major segment of demand. As they pull back more people will be playing with their own money. That generally means a lot less robust growth, since credit grew a lot easier than income will.
Greater Toronto’s new construction demand has plummeted over the past few months. Only 175 new single-family homes were sold in June, down 85% from last year. Condo apartments fell to 1,519 sales, down 44% over the same period. Higher rates have throttled demand, especially amongst investors.
Now that investors have used up all their leverage to purchase a property (HELCO, etc.), the market needs to rely on the income earning ability of individuals in the workplace. Let’s hope foreign investment has left the casino so that affordable housing for honest Canadian taxpayers becomes the norm. However, warehousing people in fewer available space appear to be the only economic driver in the Canadian economy.
I think this graph tells of the real price and future of things to come:
https://betterdwelling.com/canadian-real-estate-is-worse-than-official-data-shows-bmo-revises-forecast-lower/
https://i0.wp.com/betterdwelling.com/wp-content/uploads/2022/07/Canadian-Real-Estate-IsWorse-Than-Official-Data-Shows-BMO-Revises-Forecast-Lower-BMO-forecast.png?ssl=1
Before the pandemic BoC Secret Bunker Basement Rate of 0.25%, we had 1.75% and the house prices were flat and sloping slightly down since 2016. All forcasts so far have been very optimistic. Factoring macro house price growth and traditional wage hikes, I don’t see house prices ever reaching the BOM projections. Realistically it would land somewhere between 225 and 275 w/o QE and low rates. Dropping to these pre-pandemic levels would be going back to trend. This is just be following the slope of the graph (as fast as it went up, it will come down equally fast). There’s only so much misinformation and emotions before the fundamentals catch up to fantasy.
Canada 2030 to 2050 = Japan of the 1990s. Doom and gloom matching the FOMO to balance things out. Like all systems, balance will be reached after the active variables are removed (if they get removed by laws and regs). Who knows how long that’ll take. We Canadians are so nice, we don’t protest things that affect ourselves, our children, and our grandchildren in negative ways. This is happening, no amount of fluffing the forcasts can save us from macro economics of the situation. You think investment capital will stick around when there’s no more money to be made?
[…] equity in every possible way, and in a rush to do it as rates rise for reason.Continue Reading…Toronto Real Estate Developers Sold Zero New Single-Family Homes Last MonthGreater Toronto real estate is barely recognizable, especially compared to earlier this year. […]