The number of new condos that sold in the Greater Toronto Area during the month of August dropped to 633, the lowest level for that month in a decade, according to RealNet Canada Inc.
The figure is 18-per-cent lower than the 772 sales that occurred in August of 2012. There were 1,923 sales in August of 2011.
Toronto's condo market has been a significant source of concern for policy makers in Ottawa in recent years, including at the Finance Department and Bank of Canada. Finance Minister Jim Flaherty expressed concern in 2012 that he felt too many new units were being built, a phenomenon that could ultimately lead to a crash. The Bank of Canada has said that such a crash could pose a threat to the country's broader economy. Real estate agents say the warnings have been having an impact on the market, by causing some buyers to think twice about getting in.
Mr. Flaherty has also taken a number of steps to cool the market, most notably tightening the mortgage insurance rules 14 months ago. One of the changes he made was to cut the maximum length of an insured mortgage to 25 years from 30, a move that took a number of first-time buyers out of the market.
The total number of new homes, both low-rise and high-rise, that have sold in the Toronto area so far this year stands at 16,775, the lowest year-to-date total of the last 10 years, RealNet said Monday.
There were 777 sales of new low-rise houses during August. While that is up 32 per cent from 588 one year earlier, it is 43 per cent below the 10-year average for the month.
While a growing number of tall condo towers are dotting the city's skyline, the amount of land that's available for the construction of new low-rise homes is constrained because of government policies aimed at curbing urban sprawl and maintaining green space.
"Constrained land supply has severely diminished inventory in the low-rise sector, bringing prices to a considerable increase," stated Brian Tuckey, the CEO of BILD, which represents developers.
The price gap between new high-rise and low-rise homes has widened to a record level of $222,149. RealNet's low-rise price index rose 8.1 per cent over the past year to a record high of $658,938, while the high-rise price index eked out a mere 0.1 per cent gain to $436,789.
The gap between the price of new high-rise and low-rise homes averaged about $75,000 between 2004 and 2011, but has been growing at a fast clip during the last two years.
The unsold inventory of new low-rise homes now stands at 7,247, RealNet said, while there are 21,028 new unsold high-rise homes.
August marked the fourth straight decline in high-rise inventory, as developers have been bringing fewer new units to market of late. But economists say that the number of new condo buildings going up is set to rise in 2014.