Sales of new houses in the Toronto region jumped 178 per cent in October compared with a year earlier, the latest sign that one of the country’s priciest housing markets is rebounding as buyers adjust to stricter mortgage rules.
Nearly 1,300 single-family houses in pre-construction, under construction or freshly built sold last month, compared with 466 a year ago, according to real estate data and consultancy company Altus Group.
“The market has corrected from the lows that we have seen,” said David Wilkes, president with industry group, Building Industry and Land Development Association.
Every month this year, new house sales were stronger than the same month in 2018, when potential buyers were grappling with higher interest rates and the mortgage stress test that requires borrowers to prove they can afford loan payments at a higher interest rate.
The home resale market in the Toronto region is also rebounding. (Last month, the Toronto area had a double-digit increase in sales compared to the previous year.)
However, the majority of the new home sales occur in pre-construction projects, according to Altus, which means that the new home sales can be viewed as a leading indicator for housing starts or when construction starts on new houses, condos and other homes.
The Altus data complements a recent forecast from Canada Mortgage and Housing Corp. The federal housing agency expects housing starts to rebound in 2020 due to population growth, rising incomes and strong employment.
The growth in new house sales occurred entirely in the areas surrounding the city of Toronto such as Durham, Halton, Peel and York, where there is more land available to build new neighbourhoods.
Meanwhile, sales of new condos eased to 3,424 in October compared with 3,538 in the previous year. For most of the year, however, monthly condo sales were higher than the same month the previous year with only February and March bucking that trend.
“The market is showing some signs of resilience, but it is too early to say we have a trend,” said Elan Weintraub, a mortgage broker with Mortgageoutlet.ca.
The stress test, which came into effect in 2018, contributed to the slowdown in housing sales, both new and resales. That pushed potential buyers into cheaper properties such as condominiums, which in turn drove up prices and activity there.
The average price of a new condominium was $833,827, up 7.5 per cent from last year. The average price of a new house in October was $1,074,791, down 3.6 per cent over the same period.
“Folks were sitting on the sidelines because of the impact of the stress test [and] the lack of choice and the prices dropped to try and attract people back into the market,” Mr. Wilkes said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.