Greater Toronto Area new-home sales have hit a record-breaking slump, not having slowed this far since the 1990s. Housing pundits and industry analysts direct the blame at the two-years-old mortgage stress test via the federal government, and rising interest rates from the Bank of Canada. The drop in home sales are similar across most of the country.
Other housing experts point to another plausible explanation: Prices are too high, and they’re staying there. Because of the pricing stagnancy, buyers aren’t feeling the pressure to enter the market as fast as previously, when prices were more accessible.
In 2018, the GTA closed 25,161 “new home sales” according to HuffPost. These are the lowest sales numbers seen since Y2K, or, the year 2000, based on data released by the Building Industry and Land Development (BILD) Association.
Sales should be quite different over the last two decades, especially given the fact that the GTA’s population has risen 26% over the last 19 years.
There has been a 50% drop in sales of low-rise family homes – mostly known as single-family homes – in just one year, says BILD. The benchmark price for homes like these fell nearly 7% to $1.144 million.
New condo sales also saw some drops, at 38% fewer sales than the record numbers the market was seeing one year prior. The price of a condo increased nearly 11% in the last year and a staggering 57% over the past two years. Benchmark condo prices hit $796,815 at the end of last year.
For new condos, buyers are facing average prices of $552,423, according to HuffPost.
“From our point of view, the market is out of balance,” said BILD President David Wilkes. “We must continue to work with all levels of government to ensure that policies don’t artificially price consumers out of the market.”
Policies obviously include the mortgage stress test and the consecutive interest rate hikes seen last year. BILD is one of the industry groups that is complaining about the mortgage test in particular, and that number of complaints is only growing as the market cools.
On top of the stress tests, however, buyers are simply being out-bid on the high-priced market. Condo affordability is mimicking levels seen around 1990, during a “historic housing bubble,” while single-family home affordability is seeing its worst numbers since 1986.
Buyers are deciding to be patient rather than rush the market.
“Buyers aren’t feeling the need to get in,” said one realtor, who described the slow market numbers from January and predicted a calm start to the spring season – a hot time for the markets, usually.
BILD and others are still calling for a change in policy to open up homebuying again to more people.
A potential solution offered by BILD was to “revisit the stress test and allow a longer amortization period for first-time buyers. And we look forward to working with our municipal partners on removing barriers to development such as excessive red tape and outdated bylaws.”