Home sales recovering but condo prices having trouble keeping pace

Garry Marr
Financial Post


Existing home sales appear to be rebounding in Canada’s two most expensive markets with a new trend showing a widening gap between low rise home prices and condominiums in Toronto.

In the Vancouver market, the local real estate board said July sales came in 40.4% ahead of a year ago and were 0.1% above the 10-year average.

“Demand has strengthened in our market in the last few months, which can, in part, be attributed to pent-up demand from the slowdown in sales activity we saw at the end of last year,” said Sandra Wyant, president of the Real Estate Board of Greater Vancouver, in a release.

The overall Toronto market for existing homes continues to show signs of a strong rebound, while the condo sector lags with prices increases just above inflation.

The Toronto Real Estate Board said there were 8,544 sales in July 2013, up 16% from a year earlier and the best July since 2009 and third best on record. The board says new listings are rising, but at a slower rate than sales.

“Despite recent increases in average borrowing costs, home buyers are still finding affordable home ownership options in the greater Toronto area,”said Diane Usher, president of TREB, in a release. “We are a year removed from the onset of stricter mortgage lending guidelines and many households who put their decision to purchase a home on hold have reactivated their search. An increasing number of these households are getting deals done.”
 Among the key changes — the fourth time Ottawa has tightened mortgage rules — was a lowering of amortization lengths from 30 years to 25 years. A longer length lowers monthly mortgage rates and allows consumers to get a larger loan at the expense of paying more interest.

TREB said the tight market conditions helped push the overall average price in the GTA to $513,246, an 8% increase from a year ago.

“The low-rise market segment continued to be the driver of overall price growth,” said TREB, noting condominium prices are still rising ahead of inflation. The average condo price rose 3.4% from a year ago.

TREB now see prices rising during the rest of 2013 and into 2104.

“Months of inventory for low-rise homes remains near record lows, suggesting that sellers’ market conditions will remain in place in the second half of 2013. An increase in listings in 2014 would lead to more balanced market conditions and a slower pace of price growth next year, albeit still above the rate of inflation,” said Jason Mercer, senior manager of market analysis.

Meanwhile, REBGV says its price index for Greater Vancouver is off 2.3% from a year ago but flat from a month ago.

Over a five-year period single family detached home prices have help up far better than apartment units. The index for single family detached homes is up 11.2% over half a decade while apartments have experienced only a 0.2% gain.