That is a 18% drop from the dismal 772 sales in August 2012. And way below the 1,923 sales in August of 2011.
Toronto’s condo market is cooling so fast it has policy makers in Ottawa worried that if the condo market collapses, the housing market might go too - and thus dropping Canada into the biggest recession we have seen in decades. (2007-2009 will seem like a minor blip).
The Finance Department and Bank of Canada are justifiably concerned.
Finance Minister Jim Flaherty expressed concern in 2012 that too many new condo units were being built, a phenomenon that will ultimately lead to a crash - especially since so many were being built on credit borrowed from Canadian banks. The Bank of Canada has said that such a financial crash will pose a threat to the country’s broader economy and possibly even hurt the US economy too as many American investors are amongst those investing in Toronto condos with the intention of flipping them for a profit.
Real estate agents, brokers and pundits (myself amongst them) say the warnings have already been having an impact on the market, by causing some buyers to think twice about getting in to the Toronto condo market. But is it enough to prevent a crash by warning people not to invest? Doubtful. Most of the investors are Americans or from overseas, and they're borrowing Canadian bank money to make the investment - so if a crash happens and they lose their investment, it will be Canadian banks left holding the bag because the foreign investors will just pull out and ignore any legal threats from afar. (Because if you hold a foreign debt it really isn't that big of a deal if you just avoid that country for 7 years or so.)
For his part Mr. Flaherty has tried taking a number of steps to cool the real estate market, most notably tightening the mortgage insurance rules 14 months ago. One of the changes he made was to cut the maximum length of an insured mortgage to 25 years from 30, a move that took a number of first-time buyers out of the market (and first time buyers are more risky) and cooled it down a bit.
But such moves won't deter the overseas investors, who see Toronto's real estate market as being stable and think they can beat the odds and make a killing in profit BEFORE the market collapses.
But looking at the sales records, it is obvious the market is slowing and will stall sometime in the next year or so.
The total number of new homes, both low-rise and high-rise, that have sold in the Toronto area so far this year stands at 16,775, making it the lowest year-to-date total of the last 10 years.
There were 777 sales of new low-rise houses during August. That is 43 per cent below the 10-year average for the month of August. So the slowdown is effecting the housing market, not just condo sales.
While a growing number of tall condo towers are dotting the city’s skyline, the amount of land that’s available for the construction of new low-rise homes is constrained because of government policies aimed at curbing urban sprawl and maintaining green space. That means that condo growth is the future of Toronto, but it has to be built at a sustainable rate.
The price gap between new high-rise condos and low-rise houses has widened to a record level of $222,149. The low-rise price index rose 8.1 per cent over the past year to a record high of $658,938, while the high-rise price index eked out a mere 0.1 per cent gain to $436,789. What it means is that homebuyers definitely want houses more - and it is driving up prices faster, whereas condos are considered to be more risky despite the lower prices.
The gap between the price of condos and houses averaged about $75,000 between 2004 and 2011, but the gap has been growing at a fast clip during the last two years now that condos are flooding the market and becoming cheaper comparatively.
Many people swear off condos entirely, stating that the maintenance fees are way too high - and this is true for some condo buildings where they have gone overboard on expenses.
The unsold inventory of new low-rise houses now stands at 7,247, RealNet said, while there are 21,028 new unsold condos.
The month of August also marked the fourth straight decline in high-rise inventory, as developers have been bringing fewer new condo units to market of late. But economists say that the number of new condo buildings going up that will hit the market in 2014 - and even more that will be finished in 2015.
So we will see that unsold inventory of condos rise from 21,000 to 30,000 or 40,000 within the next couple of years.
At which time prices should drop significantly, which means people with the money available should be able to buy a condo for a lot less money when the market bottoms out.
