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Rise in listings puts the damper on a torrid market

At long last, block party chatter among Toronto homeowners appears set to turn from the unbelievable prices sellers are commanding to the more meagre price increases buyers are paying.

Real estate buyers are still bidding up the prices on their purchases, but at a somewhat tepid pace compared with the torrid activity in the resale market in recent years.

Overall, a long-anticipated slowdown appears to have arrived, according to Globe Real Estate's semi-annual home value survey of the resale and new homes market.

"It is shifting away from a seller's market," housing economist William Dunning says in summing up the fall landscape.

At the same time — as more potential buyers find the price of a traditional single-family home too rich — many are buying condominiums instead. That trend will also weigh on overall price growth in the months ahead, he says.

The average price of a resale home in the Greater Toronto Area stood at $375,394 on Aug. 31st. That marks a modest 5 per cent average gain compared with advances in the 7 to 8 per cent range for 2005.

Mr. Dunning warns, however, that the 2006 numbers have been bolstered by bigger price gains in the brisk spring market.

Prices in the current fall market are decidedly sluggish as the number of listings has risen, he says. He expects the slowdown in price growth to continue.

The picture continues to deteriorate in the new homes market, which has seen the number of sales in 2006 drop 6 per cent from levels in 2005, according to the Greater Toronto Home Builders' Association.

Drilling down farther into the numbers, sales of high-rise units edged up one per cent in August of 2006 compared with the same month last year. But sales of low-rise units — generally traditional homes — dropped 14 per cent in August compared with August, 2005.

Many buyers appear to be giving up on single family homes and buying condos instead: Of 3,083 new homes sold in August, 44 per cent were high-rise condos, the GTHBA says. In another emerging trend, 38 per cent of the condos sold were outside the city of Toronto.

The average price of a high-rise condominium has jumped to $321,851, up from $284,427 in 2005.

The economist worries that the condo market could be in for a fall.

"It seems to me that there's too much investment buying going on," he says. "A correction seems inevitable."

About 10 per cent of new condos are sold within 6 months of completion, he says. Currently, about 25,000 new units are under construction in the GTA, he estimates.

"A very large influx is coming."

Mr. Dunning says total new home sales — measured by the number of units sold — have been softening since their peak in 2002. He now sees signs that market is stabilizing.

The number of homes changing hands on the resale market is essentially flat in 2006 over last year, he says.

But Mr. Dunning remains optimistic that the resale market will continue to be fairly solid. The creation of new jobs in Canada in the past 3 or 4 years should boost demand in the next year or two because there's a long lag from the time people find a job to the time they're ready to buy a house, he says.

"We have a lot of job creation in the bank, so to speak," he says.

Still, Mr. Dunning says, housing affordability has deteriorated as the combination of prices and higher interest rates has made homes about 15 per cent more expensive this year.

But as homes become more expensive to own, most people do not give up on their aspirations to buy, the economist adds.

"You're not knocked out of the market — you adjust your expectations of what you might buy," he says.

Looking at the combined resale and new home markets, the hottest area in the first 8 months of the year was the bedroom community of Pickering, north of Highway 401. The average resale house price soared 32.2 per cent in the first 8 months of the year compared with the average for 2005.

In the area known as north Pickering, which includes North Ajax, Whitevale and Claremont, the average house price was $657,226 at the end of August, to make it the 5th-most expensive in the GTA.

Owners who purchased homes in Pickering five years ago have seen a market-leading 93.4 per cent gain.

Today, house hunters in that area will find listings are scarce. Potential buyers with about $699,000 to spend can find listed a 4-bedroom home with 5 bathrooms on a three-quarter acre lot in Claremont.

Other pockets that experienced strong price gains include Adjala, north of Caledon, where buyers can find a new bungalow on a little less than 3 acres for the average selling price of $441,921. Hamlets in the area include Loretto, Hockley, Rosemont and Glencairn.

In Toronto, Lawrence Park also continued to run hot, with a 15.5 per cent average price gain so far in 2006 compared with 2005.

The area including High Park and Bloor West Village was another sought-after location, with a 13.5 per cent jump in the average selling price.

The most expensive homes once again in the GTA are in the Bridle Path and surrounding neighbourhoods. In that area, $6.5-million will fetch a gated "French" chateau with guest house.

The average selling price at the end of August for the first 8 months of the year was $1,103,425. That was 7.7 per cent higher than the average price for 2005.

Posted on Saturday, September 30, 2006 at 05:33PM by Registered CommenterElaine in | CommentsPost a Comment

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