Thursday, 20 March 2014

Strong Pre-Construction Condo Sales Didn't Last

The pre-construction condo market got really weird this past January. Out of nowhere sales doubled on a y/y basis. In fact it was the strongest January ever for new condo sales in the city.

Why did that happen? Where did the demand come from? Who knows. Nevertheless, one month ago I offered three explanations just for the fun it:
  • it was an outlier 
  • investors were back
  • cold weather interfered with rational thinking
Long story short - it looks like the first explanation was correct.

New condo sales in the City of Toronto increased 103% in January 2014 but the rate of growth slowed down dramatically in February 2014 to just 10%. So investors were not back after all and since February was as cold as January, it looks like wind chill didn't interfere much with rational thinking.

Overall, new home sales were up by 3% in February 2014 compared to a year earlier. Below is the break down:

  • Low Rise Sales up 5% and Prices up 3.3%
  • High Rise Sales up 2% and Prices up 1.5%
City of Toronto:
  • Low Rise Sales down 36% (35 sales versus 55 sales a year ago)
  • High Rise Sales up 10%
New condos in the City of Toronto were slightly above a 14 year average.

Below is a chart showing a 12 month moving average for the City of Toronto:

Same as above, but for the GTA:

Finally, it looks like new low rise prices have plateaued. Does the low rise market finally understand that prices were getting a little bit too high?



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