It was another confusing month in Toronto’s booming — or is it crashing? — housing market, with home sales dropping a precipitous 19.5 per cent year on year in December even as average prices shot up 6.5 per cent in the region.
For 2012 as a whole, the number of houses sold in the Greater Toronto Area fell 4 per cent from the year before. And while the Toronto Real Estate Board notes that overall sales levels were still high compared to the long-run average, the average price of a house in Toronto in the last month of 2012 — $478,000 — was nearly $20,000 less than the average price for 2012 as a whole ($497,000), suggesting prices may be losing steam heading into 2013.
As the city’s decade-long housing boom winds down, the numbers are beginning to show an increasingly schizophrenic real estate market — and not just in terms of prices and sales volumes heading in separate directions.
There is now a wide gap developing between the condo market and the rest of Toronto’s housing market. While prices for detached homes shot up 6.2 per cent in December, year on year, condo prices fell 0.9 per cent — a sign that those analysts who say Toronto condos are overbuilt may in fact be right.
But a lack of available space to build standalone homes within reasonable commuting distance of downtown Toronto means the detached home market could still see upward pressure, even as the condo market sputters.
A significant slowdown in the GTA housing market could have serious consequences on the economy. Canada’s economy is now more reliant on construction jobs than it has been in recent history.
Ivey Business School prof George Athanassakos notes in a Globe and Mail column that housing investment now accounts for about 7 per cent of Canada’s GDP, well above the 5.8-per-cent long-term average, and just below the levels seen in the late 1970s and late 1980s — the last times Canada’s housing market busted out.
Athanassakos goes on to predict that Canada can expect its housing market to stagnate in the coming years and even decades, largely due to the fact that baby boomers are retiring and effectively relieving upward pressure on house prices.
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