The unrelenting demand for the Holy Grail of housing — a simple house in the midst of all those glass and steel condos — helped push up GTA house prices 6.5 per cent in August, despite a 12.5 per cent downturn in sales.
And the biggest impact, by far, was on the downtown Toronto condo apartment market where sales dropped 34 per cent, resulting in an overall 22 per cent decline in condo sales across the City of Toronto.
While housing experts had been expecting to see continued declines — and some acknowledged 34 per cent was “a pretty big number” — there was no evidence of a mass sell-off of condos by investors and the numbers were skewed somewhat by the fact 2011 was a record year for sales, they noted.
While the inventory of condos for sale did increase, the rate of increase in new listings was down about 12 per cent. And while condo sales are down, prices are holding relatively steady.
That’s good news, despite the “pretty big” 34 per cent decline, says Andrew la Fleur, a downtown condo realtor who has had a few buyers decide to keep renting lately out of fear of a coming crash in the condo market.
“I’m telling people that I think the next six months are going to be a great opportunity to buy. Things are slower. Prices are going to be down or flat. There is a good selection of units out there.
“I see this as a slowing market, not a cooling market. I think we’ll see a lot of pent-up demand in the spring market from buyers waiting for a crash that just isn’t going to come unless there is some big economic downturn.
“I think the next six months is a window of opportunity, but not everyone agrees with me,” he acknowledges.
The average price of a home in the GTA hit $479,095 last month, up from $450,323 a year earlier, according to monthly resale figures from the Toronto Real Estate Board released Thursday.
But most of that jump in prices was driven by single-family home sales in the City of Toronto (detached, semis and row houses) where demand remains so strong — and bully bids and bidding wars a virtually unavoidable fact of life — that price growth was up 15 per cent year over year, in part because of an increase in the sale of high-end homes.
The average price of a detached in the 416 region hit $746,300, compared to $564,571 in the 905 regions.
The average price of a condo apartment was down four per cent in the City of Toronto, to $349,489 as the inventory of unsold units remains higher than usual. Condo prices were up, on average, about two per cent across the 905 regions to $275,150, according to the monthly TREB figures.
“While sales were down year-over-year in the GTA, so too were new listings. As a result, market conditions remained quite tight with substantial competition between buyers in the lowrise (single family detached, semis and row houses) segment,” says Jason Mercer, senior manager of market analysis for TREB.
The drop in sales are just the latest evidence that the GTA housing market is cooling, thanks at least to some extent to tighter mortgage lending rules introduced by Ottawa that were aimed largely at what was feared to be overheated condo markets in Toronto and Vancouver.
Federal finance minister Jim Flaherty had predicted the rule changes, which limit amortizations to a maximum of 25 years and make it tougher for those with less than a 20 per cent down payment to get a mortgage, would result in about a five per cent decline in homebuyers.
While mortgage brokers are still compiling numbers, many are seeing close to a 15 per cent decline in buyers and mortgage applicants. Most impacted have been first-time buyers who can’t afford the hundreds in monthly costs the new rules have added to carrying a mortgage, says Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals.
Mortgage experts and bankers estimated before the rules came into effect July 9 that they would add the equivalent of a one per cent interest rate hike to the average new mortgage just by shortening amortization periods to 25 years.
New TREB president Ann Hannah also cited the new mortgage rules as a factor in the 12.5 per cent downturn in home sales across the GTA, which was especially felt in the City of Toronto. That’s been compounded by the fact the city is the only municipality to have its own land transfer tax which also adds to the cost of buying in an already high-priced market, says Hannah.
Some 6,418 homes changed hands across the GTA in August, down from 7,330 in August, 2011.