GTA new home sales hit historic low in August, describing a struggling market amid high interest rate
New home sales in the GTA hit historic lows in August with “very few” new projects launching as the preconstruction market continues to struggle amid a high interest rate environment.
There were 464 new home sales in August, down 46 per cent from August 2023 and 73 per cent below the 10-year average, according to the Building Industry and Land Development Association’s (BILD) Thursday report.
“August new home sales across the GTA continued to be weak, leading to elevated inventory levels,” Edward Jegg, research manager with Altus Group, BILD’s source for new home market data, said in the report.
“With most new homes taking months to construct, buyers can take advantage of current pricing and the future prospects for affordability improvements arising from mortgage rate declines that are expected to fall even further and the changes to the mortgage rules set to come into effect later this year.”
On Monday, the federal government announced any purchasers of newly built homes will be able to stretch their mortgage an extra five years, allowing 30-year amortizations for insured mortgages. And buyers will be able to pay less than 20 per cent for a down payment for homes listed under $1.5 million, up from a previous threshold of $1 million.
The expansion of longer amortizations, previously restricted to first-time buyers of new builds, was aimed at “creating more demand” for those homes, deputy prime minister Chrystia Freeland said, with hopes that in turn would lead to increasing supply. The new rule changes are set to take effect Dec. 15.
However, the current drop in demand will have long-term effects as it has already severely impacted supply coming to the market over the next few years, said Justin Sherwood, senior vice-president of communication and stakeholder relations at BILD.
“August’s new home sales data paints a stark picture of a housing market that is struggling with deep structural issues that have made the cost to build too high,” he said in the report.
A key driver of those costs are government taxes and fees, which add on average $355,000 to the cost of an average single family home, he added.
Condo apartments — including units in low, medium and highrise buildings, stacked townhouses and loft units — accounted for 235 units sold in August, down 61 per cent compared to the same time last year and 81 per cent below the 10-year average.
Single-family home sales fared better with 229 sales in August, down 14 per cent compared to the same time last year and 56 per cent below the 10-year average.
Inventory decreased slightly from July but there’s 14.5 months of inventory — the time it would take to sell inventory based on current demand — on the market.
The lack of sales is contributing to high inventory numbers, not new supply coming to the market, the report said, causing an “unhealthy situation” because as interest rates come down stimulating demand, the lack of new build starts will exacerbate the already dire supply-and-demand problem.
“The crisis is real and will be reflected — in the next several years — by fewer jobs, fewer new homes, and compounded affordability challenges,” Sherwood said.
This article was first reported by The Star
