The price of a new construction home in the Toronto area rose 38.5 percent year-on-year in December to a record $ 1.8 million.
Price growth limited a year in which builders saw the most new home sales since 2002 and stock levels of single-family homes reached a new 12-year low of 776 by year-end.
The 46,651 new homes and apartments sold last year were 27 percent above the 10-year average, the Building Industry and Land Development Association (BILD) reported Thursday.
Sales of apartments far exceeded single-family home transactions. The 32,919 apartments sold last year were 40 percent above the 10-year average and only 125 units less than the 2017 record.
The benchmark price of apartments rose 13.5 percent year-on-year in December to $ 1.16 million.
Prices, especially in the single-family home category of townhouses, semi-detached and detached housing, are a function of dwindling inventory, says Ed Jegg of Altus Group, which tracks sales and prices for BILD. Usually, homes with lower prices sell first, leaving the more expensive units on the market in the end, he said.
There are typically fewer developments launched at the end of the year, but last month’s inventory of about 2.3 months (which refers to the time it will take to sell the current inventory at the current selling rate) was a record low for December. A balanced market will have nine to 12 months of supply. New home supplies include pre-construction homes, those currently under construction and those in completed buildings.
Jegg will not speculate whether new house prices could exceed the $ 2 million mark this year. But without an increase in stocks and with a demand that will be further fueled by immigration, he said there is room for price growth.
“I do not want to say we are going to reach $ 2 million, but you know there is still room for some growth there given the underlying factors,” Jegg said.
However, interest rates that will increase mortgage costs will also play a role in consumer sentiment, he said.
The Bank of Canada on Wednesday refused to increase its key lending rate, but indicated that it would almost certainly rise rates as early as March.
The wider gap between the price of single-family homes and apartments – now around $ 600,000 – could shift some purchases to the more affordable side of the market, easing some of the pressure on single-family homes, Jegg said.
Justin Sherwood, senior vice president of BILD, said some housing developments planned for December and January may have been delayed due to COVID-19 restrictions, but there are likely to be more high-end units on the market as the year goes on.
But low-rise single-family homes are a different story, he said.
“There is only a shortage of serviced lots ready to go out there. The benchmark price you see in single family is a reflection of really low stock levels and the product mix that was available at the time.”
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