31 Aug The Greater Toronto Area is Seeing a Dramatic Decrease in Detached Home Sales
The effects of the Ontario government’s Fair Housing Plan are now being felt, and nowhere is the impact more evident than in the Greater Toronto Area. Prior to the Fair Housing Plan’s implementation, the GTA real estate market had all the characteristics of a bubble, and the Ontario government had made it clear that it needed to be addressed. These measures appear to be working, as the number of sales last July fell by 40.4 percent when compared to July 2016. The average home price in the GTA for July was $746,218 which is 19% lower from April’s peak price of 920,791, and is 6% lower than the average selling price of $793,915 in June.
Typically as real estate prices decrease, the supply of new homes increases, which is certainly the case for the GTA. Toronto is seeing record increases for new listings and is growing at the 2nd highest rate in Canada next to Hamilton-Burlington. In Toronto, there were 115,475 new listings from January 2017 to the end of July 2017 which is a 16.3% increase from the same period last year. Hamilton-Burlington had 13,108 listings from January 2017 to July 2017, which is a 17.5% increase over the same period in the previous year.
Overall this is good news for people who were looking to buy a detached home during the market’s peak, but were unable to find any properties at a reasonable price. In August of 2017 the average GTA detached home price was $974,212 which is considerably less than the average price of $1,000,336 seen in July 2017. This is also a huge benefit to homebuyers looking at getting a CMHC insured mortgage. Buyers with a down payment of less than 20% need insurance that protects the lenders in terms of default, and the CMHC, the biggest provider of this insurance type, only offers insurance on properties worth less than $1 million.
While detached home prices are declining, they are still out of reach for many people in the GTA. The more affordable pricing of condo units proves to be very appealing, and make up the majority of home sales in Toronto. For June of 2017, Toronto had seen 6,046 apartments and townhouses sold which accounted for 91% of all homes sold. While condo sales increased by 89% over the previous year, detached home sales dropped by 72% over the previous year. While detached homes are falling, demand for condos are pushing condo prices up. Price per square foot for a Toronto condo, which is a standard metric for judging the price of a condo unit, went up to $742 from $587 the previous year.
Overall it looks to be a time for dramatic change in terms of GTA real estate. Some are hopeful that the market will return to its red hot state as seen before the Fair Housing Plan, but with additional interest rate increases planned for 2018, this seems doubtful. Many mortgage professionals, myself included, are being increasingly wary of the state of the market. We are seeing more and more applicants, while most lenders are restricting their lending standards. There is a general consensus that the real estate bubble has popped, but no one is really sure of what the future holds.