Toronto new condo sales down in September as market slows ahead of rate cuts, BILD says
Slashed interest rates did little to kickstart the Toronto area’s new home sales in September, with a glut of shiny new builds still waiting for buyers in a stubbornly sluggish market, new industry data shows.
Condos, especially, were languishing on the market. The new data, compiled by Altus Group on behalf of the GTA-based Building Industry and Land Development Association (BILD), found just 247 new-build condo units were sold regionwide in September — a plummet of 81 per cent compared to September 2023, and 85 per cent below the 10-year average.
While new single-family home sales have kept up a bit more momentum, the 344 units sold across the GTA in September are still a fraction of usual activity, down 41 per cent from September 2023, and 58 per cent below the 10-year average.
As the backlog of unclaimed new housing creeps upwards — now sitting at 17,427 condo units and 4,444 single-family homes — housing observers say it’s only a matter of time before the market turns, with the Bank of Canada’s heftier rate cut last week expected to coax more would-be homebuyers off the sidelines.
“I think we’re going to start seeing some progress in the last two months of the year, especially as we’re looking at the potential of another cut in December,” forecast BILD executive Justin Sherwood. “But what we’re seeing right now — at least in September — is the market holding its breath.”
While market is expected to pick up steam as interest rates keep dropping, BILD has warned the current “stagnated market” could have long-term ripple effects. When buyers yielded, waiting for more favourable economic conditions to make a purchase, builders also pumped the breaks. Though the market is suffering from a lack of buyer activity, broader analyses have shown the Toronto-area needs a significant injection of housing to meet expected demand over the years ahead.
“We have a growing population. Everyone knows that,” Sherwood noted. The problem wasn’t a lack of people wanting or needing housing, he said, it was that prices for new homes, based on rising costs to build them, are simply too steep for many households to manage, especially with higher interest rates.
While lower interest rates are expected to ease the burden on potential buyers, kickstarting demand again, Sherwood fears the housing supply pipeline has already been stunted as some builders have shelved their housing projects.
“The groundwork for a future supply crunch is being laid out today,” the BILD report warns, echoing past appeals from the industry group for governments to grease the wheels by eliminating more taxes and fees charged to builders.
The home building industry faces more headwinds today than just thinned buyer interest, with developers increasingly struggling to launch or finish projects in the face of elevated construction costs, labour shortages and the same high interest rates that have pushed would-be buyers onto the sidelines.
As reported by the Star’s Clarrie Feinstein, at least 27 Ontario developers have gone into receivership this year, affecting hundreds of expected housing units.
While the Bank of Canada elected to make a more drastic cut to its key interest rate last week — slashing it by 50 basis points after three consecutive 25-basis-point cuts — experts say it’s now walking a delicate tight rope, as it aims to revive a languid economy without pouring fuel on the real estate market, and winding up once again with overheated demand and prices.
For now, the benchmark price of new condos and single-family homes is sitting slightly lower than last year, BILD says. For condos, the benchmark price is hovering around $1.025 million, or one per cent below last year. For single-family homes, the benchmark was down just 0.1 per cent, to roughly $1.565 million.
To make a 20 per cent down payment at those price levels, a household would need roughly $205,000 for a new condo unit in the GTA, and roughly $313,000 for a new single-family home.
This article was first reported by The Star
