Tony Wong – Yourhome​.ca

Den­nis Au-Yeung has heard the dooms­day pre­dic­tions of the hous­ing mar­ket. In par­tic­u­lar, that too many con­do­mini­ums are being built in the city of Toronto.

Pre­pared for a less tor­rid mar­ket, the Chief Finan­cial Offi­cer of Con­cord Pacific Group Inc., the largest condo builders in Canada, did not expect line ups for his lat­est project, Tango at Con­cord Park Place in North York last month.

But within a day the 250 units he had put up for sale had sold out.

“I really didn’t get this kind of response, we had actu­ally expected the mar­ket to soften a lit­tle,” said Au-Yeung.

Au-Yeung thinks the strong response is because some buy­ers have been priced out of the down­town mar­ket and there hasn’t been as much sup­ply in areas out­side the core. The aver­age sell­ing price was $440 per square foot com­pared with over $500 downtown.

“I think afford­abil­ity is cer­tainly an issue,” he said.

Accord­ing to a Sta­tis­tics Canada report Thurs­day, new home prices are up across Canada and par­tic­u­larly in Toronto where con­do­minium sales have been strong.

Prices of new homes in Canada rose by 0.3% in May over April, accord­ing to the report.

This is the third month in a row of iden­ti­cal price increases, as new home builders con­tinue to report strong mar­ket conditions.

Prices increased the most in Regina, fol­lowed by Toronto and Oshawa accord­ing to Statscan.

“Builders reported that they increased their prices as a result of higher mate­r­ial and labour costs as well as increased land devel­op­ment,” said Statscan.

The Toronto mar­ket, which accounts for a third of all new hous­ing devel­op­ment reported a 0.7% increase, well above the national average.

Year over year, Toronto new home prices are up by 3.2%. Van­cou­ver hous­ing prices remain the mar­ket leader, with a 5.8% gain year over year.

“It is a lit­tle strange that the resale mar­ket seems to be soft­en­ing, but we’re still going strong,” said Au-Yeung. “But we also haven’t had the big price increases.”

New home price increases have been restrained in com­par­i­son to the exist­ing home mar­ket. Buy­ers try­ing to take advan­tage of low inter­est rates and not will­ing to wait for new prod­uct have bid up the prices on resale homes.

The aver­age price for June trans­ac­tions for exist­ing homes was $435,034, or up 8% from June of 2009 accord­ing to fig­ures released by the Toronto Real Estate Board this week. How­ever, sales fell for the sec­ond straight month in a row.

The new condo mar­ket on the other hand, has been tar­geted by investors who are will­ing to wait sev­eral years for new prod­uct before rent­ing or divest­ing of the asset. That could also be prob­lem­atic as some ana­lysts have said there are too many units under com­ple­tion for the mar­ket to absorb.

“A cool­ing off of hous­ing prices is likely to occur in June in response to the May jump in mort­gage rates, a cool­ing off of global com­mod­ity prices, and the impact of the har­mo­nized sales tax,” said Arlene Kish, senior econ­o­mist of HISIHS Global Insight.

As a result, new home prices are also expected to ramp down in the third quarter.

“Cana­dian hous­ing activ­ity is mov­ing into reverse,” said David Rosen­berg, chief econ­o­mist at Gluskin + Sheff and Asso­ciates in Toronto. “It looks like the impact of mod­estly higher inter­est rates and Canada Mort­gage and Hous­ing Corporation’s incre­men­tal moves to tighten up its under­writ­ing guide­lines have taken the steam out of the real estate market.”

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