The downturn in Toronto’s property marketplace is spilling into the market for newly constructed houses as contractors face weaker demand, particularly for more costly detached houses.
Since the Ontario government announced a package of measures in late April to cool the overheated housing market in Toronto, builders of ground-level houses — such as detached and semi-detached houses in addition to townhouses — have seen sales slow as many buyers have stayed on the sidelines or have turned into the less costly condominium market.
One result has been an acceleration in the long term change toward building smaller and less-expensive housing choices, especially townhouses.
Brian Johnston, chief operating officer at Mattamy Homes, Canada’s largest home builder, said his team have already discussed incorporating smaller units in a planned new job to supply a lower-priced alternative for buyers.
“Our plan is to market what you need to purchase, and if you prefer smaller, we’ll sell it to you,” he said.
Mr. Johnston stated the summer months were rather slow as worried buyers sat on the sidelines, but there’s been some advancement in buyer interest in September.
“We have seen a tiny perking-up, but we are back to where we were 12 months ago,” he said. “A year ago, we might have opened up 80 townhouses in one of our communities in the GTA and we’d have sold it out in a weekend. That’s no longer true. We might sell four to six at a weekend, which is similar to a normal industry. It is what we was used to.”
In the five months from May to September, the amount of new detached-home begins in Toronto fell 14 percent compared with the same period last year, while building starts of less-expensive townhouses and semi-detached houses climbed sharply, based on data from Canada Mortgage and Housing Corp..
Housing starts are often a lagging indicator because lots of the projects that began construction in September were presold to buyers several months before.
The Construction Industry and Land Development Association (BILD), which represents Toronto-area builders and developers, reported earnings of fresh low-rise homes fell 76 percent in August compared with a year earlier throughout the Greater Toronto Area, after falling 85 percent in July compared with the same month last year.
BILD chief executive officer Bryan Tuckey said the summer is typically slow and it’ll require more months of data to find out just how much the market has been affected.
But while the condominium sector remains on track to be at or near a record sales year, Mr. Tuckey said the low-rise housing market has seen sales fall because of both reduce demand and low inventory available for sale following a solid first half of this year. For new low-rise houses, 2017 is well under the 10-year average for earnings, despite a solid start to the year, he said.
“It’s chilled from July to August and I feel lots of that is that there’s a bit more stock there,” he said.
Prices also have declined as demand has waned, but not nearly to the amount that’s been seen in the resale market. The typical new single-family detached home in the GTA sold for $1.29-million in August, down two percent from $1.32-million in July but still up 38 percent compared to a year before.
Mr. Tuckey said there’s been increasing demand for smaller components, spurred by buyers seeking cheaper options and by planning rules requiring more density in new developments.
“Townhouses have really been the new single from an affordability perspective,” Mr. Tuckey said. “You see in jobs now a lot more townhouses, and single-family homes are normally a bit more high-end.”
Patricia Arsenault, executive vice-president at property research company Altus Group, stated the available inventory of new low-rise houses is low in historical terms and much of what’s available is over $1-million, which is beyond the reach of most buyers.
She considers resale home sales peaked in March and were softening before the state’s steps were announced in April, and says the new home market followed suit, but with a lag.
Courtesy: The Globe And Mail