June new home sales dive 46% – The Globe and Mail

The Market

June new home sales dive 46%

That may be good news for buyers looking for quality and a bargain

Terrence Belford

Terrence Belford

From Friday’s Globe and Mail

June’s new home sales are in. If you’ve been following the trends, the results will come as no surprise.

The month traditionally kicks off the summer doldrums in both low- and high-rise sales in the GTA. Peak times are from mid-March to mid-May and mid-September to the early days of November.

This past June, low-rise sales totalled 1,156 units; that is a 24-per-cent drop from May and a whopping 46-per-cent drop from June, 2009.

New high-rise condo sales in the GTA totalled 1,764 suites. They were a bright spot in the housing picture – up 20 per cent from May and down just 1 per cent from last year.

The slower pace of new housing this year may have brought good news for those who did indeed buy. Last week, J.D. Power released its fifth annual survey on new home buyer satisfaction and the results show a sharp jump in Power’s satisfaction ratings.

Last year, only 8 per cent of the 1,864 buyers of low-rise homes – detached, semis and townhouses – surveyed said their home was free of defects when they took possession. This year that number is 20 per cent. While Power does not explain this significant increase, my sense is that it may be linked to a slower pace of activity in the industry.

Less demand for their product this year has meant builders need not rush to capitalize on high demand. Trades have more time to do the job right. No need to bring in inexperienced workers to lay bricks, fasten and finish drywall and do the fine carpentry required for cabinets, countertops and window trims.

The Power survey also revealed another bonus for buyers. Those offered discounts on asking prices almost doubled this year. Again I think this can be directly related to a slowdown in demand. To stay in business builders have to build, which means they also have to sell what they have built.

Fewer buyers means greater competition and greater competition means offering deals.

Over all, prices continued to rise. The average new low-rise home in the GTA went for $487,840 in June, up 2 per cent from the previous month and 11.2 per cent from a year earlier. The average new high-rise suite cost $426,252 in June, up about 0.6 per cent from the previous month and 9.6 per cent from June, 2009.

Take away the impact of the harmonized sales tax, which added 8 per cent to the price of homes over $400,000, and the year-to-year increase did not look all that bad.

What a closer examination of all the facts and figures showed is that the biggest sales in high-rise condos are recorded during the days following the launch of new projects. In the high-rise category, more than 50 per cent of the month’s sales can be attributed directly to new launches, says George Carras, president of RealNet Canada Inc., which tracks these things.

The same cannot be said about low-rise homes. There were eight new launches of detached, semi- and townhouse projects in June, but sales among them only accounted for 14 per cent of the month’s total.

Mr. Carras says eight launches is not a lot of product and that may skew the statistics. He also says there would have been quite a few more new projects launched in June but delays in municipal approvals last spring caused builders to shelve launch plans until the peak buying months of fall.

And what of rising prices? As he sees it, the GTA has a lot of unsold high-priced houses and their numbers may be skewing average prices.

“The homes that really moved well in June were in the lower end of the price range,” he says. “Those starting at $750,000 and running up to well over $1-million just didn’t find buyers. When you have a lot of them on the market still unsold, that can drive the average price up.”

He points to Beaverbrook Homes’s relaunch of University Square in North York. The project originally had a mix of freehold and condo semi- detached homes and townhouses. Prices ran from $393,990 to $399,990.

When Beaverbrook found buyer resistance it eliminated the semis, renamed the project Yorktowns and relaunched with 12 different models of freehold-only townhouses. It dropped prices to as low as $344,990 but also added upscale towns selling for as much as $514,990.

“That seemed to do the trick,” Mr. Carras says. “What I think it shows is that to be successful these days you have to be extremely sensitive to what people want and to price your homes accordingly.

“You can no longer take an ‘if I build it they will come’ philosophy.”

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About Tariq Sultan
Dear Readers, I am a dedicated Toronto, Ontario based real estate professional who has been successfully meeting and exceeding the needs of his clients for past several years. I am actively involved in the insurance, financing, and mortgage industry. Real estate is not only my career – it is my passion. I strive to continuously provide my clients with exceptional service to ensure they are fully satisfied when it comes to their real estate needs. For any real estate related inquires contact me today, I will be happy to assist you. Best wishes, Tariq Sultan

2 Responses to June new home sales dive 462 – The Globe and Mail

  1. Grahame says:

    Hi, my name is Grahame with the Ontario Ministry of Revenue. I read you post and wanted to add the following comments.

    The number one thing that can be done to ensure that people can afford a home is to ensure that people have a job. The HST is estimated to increase investment by $47 million and almost $600,000 jobs.

    The HST will not apply to homes under $400,000 and will not apply to resale homes regardless of the price.

    The HST is part of this comprehensive tax package that will see 93 per cent of Ontarians receive personal income tax cut. With these cuts Ontario now has the lowest provincial tax rate in Canada on the first $37,106 of taxable income. In fact, 90,000 low-income Ontarians will no longer have to pay Personal Income Tax.

    To help families we have introduced a permanent $260 Sales Tax Credit for low- and middle-income adults, children and seniors. In total $4.2 billion in transition payments will be delivered to help Ontarians adjust to the Harmonized Sales Tax. It is important to remember that every $100 in tax relief is equivalent to the 8% tax on $1250 in newly taxed items.

    • Tariq Sultan says:

      @Grahame: Thank you for your comment and pointers Grahame! It certainly adds to the content of the article and also points out other side of the coin that many Canadians don’t readily understand.

      Best regards,
      Tariq

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