Sales of new condos in Canada’s largest metro area are running out of steam, but the people who are still buying are spending more than ever.
The benchmark price of a new condominium apartment in Greater Toronto jumped 18.8 per cent over the past year, to just short of the $1-million mark, at $990,880, according to numbers for October from the Building Industry and Land Development Association (BILD).
But sales of new condos in the metro area were down nearly 32 per cent compared to a year earlier. The City of Toronto led the way, with a 46-per-cent drop in sales.
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In another sign that buyers are shifting to larger homes in outlying areas amid the pandemic, detached home sales jumped 44 per cent from a year earlier, and the benchmark price rose 12 per cent in the past year, to $1.21 million.
That kept the decline in new home sales in October to around 10 per cent, BILD said.
“When we look at the overall numbers so far in this very unusual year, it’s clear that the demand for the homes our industry builds is not going anywhere,” BILD president David Wilkes said in a statement.
But that demand is shifting rapidly. Realtors say supply is soaring and buyers are vanishing in the downtown core, where there used to be many short-term rentals before the pandemic.
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A report from real estate portal Zoocasa found that some existing condo high-rises have seen sales drops of more than 50 per cent, though in those buildings ― as in the resale market as a whole ― the per-square-foot price is roughly the same as a year ago.
House prices have soared during the pandemic in many parts of Canada and elsewhere, and economists say it’s due to lower interest rates, generous government income supports in the crisis, and deferred debt payments.
Lower interest on mortgage payments means housing is becoming more affordable even as prices soar, National Bank of Canada said in its latest affordability monitor.
The cost of carrying a home in Toronto and Vancouver, as a share of income, dropped to its lowest since 2016.
Soaring savings rate
Additionally, with large parts of the economy shut down this year, many households were able to save more money than usual, giving them more for a down payment on a house.
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Canada’s household savings rate ― the percentage of disposable income households don’t spend ― spiked to 28 per cent in the second quarter of this year, from a long-tern average of around 3 per cent. It’s the highest savings rate in records going back more than 50 years.
The U.S. saw a similar spike in savings. There, house prices jumped 7.8 per cent over the past year, including a 3.1-per-cent increase in the third quarter, the fastest quarterly growth on record, according to the Federal Housing Finance Agency.
The question is whether this run can last.
“With extraordinary government support to household income phasing out and (mortgage) payment deferrals not at play in 2021, the housing market is facing some headwinds given the still recovering labour market,” economists Kyle Dahms and Alexandra Ducharme wrote in National Bank’s affordability report.
With restrictions on activity still in place headed into 2021, the economists said immigration rates could be weaker than expected ahead, meaning less demand for housing than expected.