HOME SALES
GTA real estate market still a puzzle
April 7, 2009
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Tony Wong
BUSINESS REPORTER
There are signs of hope in the Greater Toronto Area for the key spring existing home market as sales have started to recover from a steep sales downturn.
The Toronto Real Estate Board reported 6,171 sales in March yesterday, still down 7 per cent from March of 2008, but cause for some joy for realtors since it represents the smallest year-over-year decline in the past five months – in other words, since the economy took a historic turn for the worse.
"While the GTA economy and housing market have weakened sharply, the resale housing market does not show signs of panic," housing analyst Will Dunning said in a report.
"If this relative calm is sustained, it will limit the fall in home values and reduce the consequent economic damage."
Plunging interest rates and lower home prices have attracted buyers who had been priced out of the market in recent years, analysts say.
Average home prices in March were also relatively stable, at $362,052, down less than 5 per cent from the same month last year.
"Sales in March increased at a rate over and above what would be expected from the normal spring time bump," said Jason Mercer, the board's analyst.
"A greater number of households have taken advantage of increased affordability in the housing marketplace."
But analysts caution that a frosty January and February this year may have caused some sales to spill over into March, while a City of Toronto land transfer tax introduced last year had possibly spurred some deflation in sales from March of 2008.
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New listings on the market were down by 2 per cent, characterized as a "good-news, bad-news" scenario by analyst Dunning.
"It means that few consumers are distressed or panicking, and it is limiting downward pressure on prices. On the other hand, it signals there is reduced interest in move-up buying and points to continued slow sales in both the resale and new homes markets."
Meanwhile building permit figures released yesterday by Statistics Canada were not as positive.
The value of permits in Canada fell by a greater-than-anticipated 15.9 per cent to $3.7 billion in February compared with January, with the largest decreases coming from Ontario and the non-residential sector, which includes industrial, commercial and institutional buildings.
"The construction sector is now weighing much more heavily on the Canadian economy," said BMO Capital Markets economist Benjamin Reitzes in a note.
"The decline in economic activity, particularly in manufacturing, appears to be spilling over into the construction sector."
On the other hand, residential permits in Canada held up well, falling by only 0.3 per cent.
"Perhaps this is a tentative sign that the housing market may soon hit bottom," said Reitzes.
In the Toronto area, the numbers were grim: Permits were down by a greater-than-average 40 per cent with most of those declines in the non-residential sector, and the housing sector was still down by 20 per cent from a month earlier and much worse than the national average.
"As the correction gathers momentum the pace of construction activity will likely continue to moderate in the near term," said TD Securities economics strategist Ian Pollick.
With massive government infrastructure stimulus in the pipeline, one large mitigating factor analysts expect is that non-residential permit numbers will receive something of a boost in the coming months.
Toronto Star