Prices for new condos in Toronto are rising, while sales are going down

Although sales of new condos in Toronto are falling, buyers still pay more than ever.

According to the Building Industry and Land Development Association (BILD), the average cost of a new condo in Greater Toronto Area was up by 18.8% in October compared to a year earlier and reached $990,880.

However, sales of new condos in the area fell by about 32% during the same period, with the City of Toronto leading the way and showing a 46% annual sales decline.

Another sign that buyers are switching to larger homes in suburbs is the fact that detached home sales rose by 44% from a year ago, and the benchmark price went up by 12% to $1.21 million.

BILD says October sales were down by about 10%.

“If we look at the overall numbers of 2020, we’ll see the demand for Canadian homes is not going anywhere,” – BILD president David Wilkes noted.

Nevertheless, this demand is changing sharply. According to realtors, supply is rising and buyers are leaving the downtown core, where there used to be many short-term rentals.

Zoocasa’s recent report shows that certain existing condo high-rises have seen sales going down by more than 50%, although in those buildings the per-square-foot price was almost unchanged from a year ago.

Moreover, as large parts of the economy were shut down this year, many households were able to save more money than usual.

As a result, Canada’s household savings rate (the share of disposable income households don’t spend) rose from the long-term average 3% to impressive 28%, marking the highest number in more than 50 years.

The main question is whether it’s going to last for long.

“As the government support to household income is winding down, and mortgage payment deferrals are ending, the real estate market will face some challenges amid still recovering labour market,” – economists Kyle Dahms and Alexandra Ducharme say.

With possible restrictions in 2021, the economists expect immigration rates to be weaker than anticipated, and it means less demand for real estate.