First-time home buyers appear to be delaying their purchases in the wake of the province’s new policies intended to cool the housing market.
At the same time, consumers buying new construction homes are overwhelmingly opting for lower-priced condo apartments and stacked townhouses.
Two reports released separately Friday by the Toronto Real Estate Board (TREB) and the Building and Land Development Association (BILD) suggest that first-time buyers are sitting back and waiting to see what happens in the cooling re-sale housing market.
But among those purchasing new construction, condos are the starter homes of choice.
High-rise and mid-rise apartments and stacked townhouses represented 86 per cent of new-construction home sales in the region in May, as the cost of a new townhouse crossed the $1 million mark for the first time, according to BILD.
Condos comprised 75 per cent of new-construction home sales this year to date.
Unlike the re-sale market, which has seen an influx of listings over the last two months, the supply of newly built homes remains constricted, especially in the single-family home category, said BILD CEO Bryan Tuckey in a press release.
“The price acceleration in the condo portion of the market is especially worrisome since it not only represents the lion’s share of new housing in the GTA, it’s also making it difficult for condos to remain the affordable option,” he said.
The average price of a new single-family home rose about $10,000 to $1.2 million in May from April — a 40 per cent gain over last year. Condos averaged $604,683 last month, a $30,000 increase over April and a 33 per cent rise compared to the same period last year.
Ipsos research for TREB, conducted in May, showed that first-time buyers comprised only 40 per cent of those who plan to buy a home this year — down from 53 per cent in a November survey.
The findings come as TREB prepares to update its 2017 market forecast on July 6.
TREB had been predicting that this year, a seller’s market would continue in the re-sale home sector, with prices rising between 10 and 16 per cent over last year.
But double-digit price growth in the first four months of the year — March prices rose 33 per cent year over year — has been cooling since just before the government’s Fair Housing Policy announcement on April 20.
With a 15 per cent foreign buyers’ tax as its centre, the policy was aimed at non-resident speculators.
While it’s unclear whether those buyers have been discouraged, TREB says the new policy had contributed to the decision of 10 per cent of buyers who say they won’t purchase this year.
“It makes sense that some first-time buyers have decided to at least temporarily put their decision to purchase on hold. First-time buyers are more flexible, and can take a wait-and-see approach. They could also re-enter the market quickly once they make the decision to purchase,” said TREB director of market analysis Jason Mercer in a press release.
Home prices were still about 6 per cent higher in the first half of June over the same period last year, according to TREB’s mid-month sales update. But realtors expect that the board’s official month-end report will show a second consecutive month-to-month price drop.
TREB’s newest consumer survey on May 23 to 29 showed 30 per cent of Toronto-area households are at least somewhat likely to list their house in the next year.
Fifteen per cent cited the Fair Housing plan as the primary reason they would put their home on the market.
Of those who said they would be selling, 80 per cent expected to buy another home.
“That means that these households are not exiting the home ownership market, but instead, changing the type or location of the home they will own,” said Mercer.
The 35 per cent of households that indicated they were likely or very likely to buy a home in the coming year was similar to the fall survey findings, said TREB.