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IN SHORT
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In the Greater Toronto Area (GTA), real estate is experiencing astonishing momentum. As demand for new homes intensifies, sales appear to be collapsing, leaving industry players perplexed. How to explain this paradox ? Economic factors, interest rate fluctuations and changes in buyer preferences play a crucial role in this complex situation. Let’s analyze the mechanisms behind this unexpected downturn in the real estate market.
A declining market
THE new home sales in the Greater Toronto Area (GTA) are experiencing a significant drop. In June, just 1,339 new homes were sold, representing a 46% drop from the previous year and 59% below the ten-year average. Why this decline when demand remains strong?
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Rising construction costs
One of the main obstacles is the high cost of building materials. Prices for materials and labor have soared in recent years, making construction projects very expensive. Moreover, the municipal fees as development charges add additional financial pressure on property developers.
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Extended approval times
The slowness of municipal approval deadlines for new projects is another blocking factor. These delays result in costly and unpredictable delays, impacting the ability of developers to bring new projects to market. While the demand is there, the supply is not keeping up, exacerbating accessibility problems.
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Prices still high
Prices remain high despite the drop in sales. The benchmark price for new condominium apartments has fallen 6% over the past 12 months, reaching $1,023,389, while new single-family homes have a benchmark price of $1,613,613, also down 6% year-over-year. These high prices deter many potential buyers, particularly first-time buyers.
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Inventory increasing
The inventory of new homes continues to increase. In June, there were 21,158 units in inventory, including 17,391 condominiums and 3,767 single-family homes. This high inventory level, maintained since fall 2023, represents a supply of 14.5 months based on the average sales of the last 12 months.
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Sales by type of housing
Despite the increase in costs and delays, there are notable differences depending on the type of housing sold. In June, 732 condominium apartments were sold, down 61% from the previous year and 68% below the ten-year average. Conversely, single-family home sales increased slightly by 5% from last year, but remain 38% below the ten-year average.
| Postman | Impact |
|---|---|
| Cost of materials | Rising |
| Municipal fees | Students |
| Approval times | Slow |
| Inventory | Pupil |
| Reference price | Falling |
| Condominium sales | Falling |
| Single-family home sales | Slight increase |
| Request | Strong |
| Offer | Insufficient |
| Financial accessibility | Difficult |
- Factor: Cost of materials
- Impact: Increasing
- Factor: Municipal fees
- Impact: High
- Factor: Approval times
- Impact: Slow
- Factor: Inventory
- Impact: High
- Factor: Reference price
- Impact: Declining
- Factor: Condominium sales
- Impact: Falling
- Factor: Single-family home sales
- Impact: Slight increase
- Factor: Demand
- Impact: Strong
- Factor: Offer
- Impact: Insufficient
- Factor: Financial accessibility
- Impact: Difficult
FAQs
Why are approval times so long? Approval delays are mainly due to complex bureaucratic procedures and a lack of resources in municipal services.
What is the impact of high construction costs? High costs limit developers’ ability to launch new projects, making new homes more expensive for buyers.
How does demand remain strong while sales are declining? Demand is fueled by population growth and housing needs, but supply is not keeping pace due to structural barriers.
Why do prices remain high despite falling sales? Prices are kept high due to high material costs and municipal charges, as well as delays in new projects.
What is the outlook for the market in the short term? The outlook remains uncertain due to ongoing costs and long approval times.
Why does new home inventory continue to grow? Inventory is increasing as new projects take longer to sell, in part due to high prices and low affordability.
How can buyers find affordable homes? Buyers can look for homes outside of major metropolitan areas where costs may be lower.
Plan social chez Nexity, 1er promoteur immobilier 🇫🇷
— MoneyRadar (@MoneyRadar_FR) February 29, 2024
Son bénéfice a chuté de 33% cette année, et son résultat opérationnel dans le pôle "promotion immobilière résidentielle" s'est effondré de 50% !
3400 emplois sont en jeu…
Dans le même temps, Nexity ne distribuera pas de… pic.twitter.com/24XqhSyoyc
