New-home sales hit a record 20-year low
Lull in housing market compounded by federal intervention, mortgage stress test
New construction home sales hit the lowest number for April in over 20 years, says the association that represents homebuilders.
Newly built single-family home prices dropped 5 per cent year over year to $1.15 million, down from about $1.2 million in March. But the benchmark price for condos continued to rise — 29.8 per cent year over year to $739,965, but down month over month from $742,801.
There were 65 per cent fewer houses and condos sold last month compared to April 2017.
That put the sales of single-family homes — detached, semi-detached and townhouses — 70 per cent below the 10-year average. Condos were 38 per cent below that average, according to the Building and Land Development Association (BILD).
Although new home data by Altus Group goes back only as far as 2000, BILD said previous data shows 1995- 1996 was the last time April sales were as low as the 1,727 last month.
The new construction home industry is being affected by many of the same factors that have led to a sluggish 2018 in re-sale real estate in the Toronto area, said BILD chief executive David Wilkes.
Part of the slowdown is seasonal, he said.
There is a lull in the housing market compounded by interventions from government and new mortgage stress test rules introduced by Canada’s banking regulator.
“Part of it is cyclical. We often see a slowdown in late winter or early spring before the spring market picks up … As you’re seeing in other components of the housing market, we’re in a bit of a pause right now,” Wilkes said.
“People are reassessing and part of that reassessment, no doubt, stems from the affordability issue we need to address within the GTA.”
But the fundamentals of the market haven’t changed, he said.
The Toronto region needs 55,000 new homes a year to meet the demand over the next 20 years, he said.
The lower number of home sales in April, combined with the release of new housing projects, meant there were 15 per cent more new construction homes available in April compared to March.
But the five-month inventory is still below the nine to12 months’ supply that would indicate a healthy market, BILD said.
The association is recommending governments help put more houses on the market by streamlining the approval process.
“It often takes 10 years to get a new project online,” Wilkes said.
“In some cases, you need to have 52 different studies, reports, check lists or plans approved before you can get approval for a project to begin. There really is a lot of work that can be done to ensure new product is brought on the market in the most efficient, effective manner.”
BILD says all housing projects must meet six provincial requirements, in addition to specific municipal and regional approvals.