Tony Wong – Toronto Star

Home price appreciation will slow in the Toronto market this year as a looming supply of new homes is completed, giving consumers more choice and helping to mitigate future gains, a bank study said.

“The stock of new construction is rising and that will have the effect of slowing any price increases,” National Bank of Canada senior economist Marc Pinsonneault said Tuesday.

Toronto prices were up 4% at the end of 2009, with sales rising 17% year over year, as homes sold in an average of 23 days, the shortest interval in recent history.

However, a record number of completions this year will help bring more listings to the market. Move-up buyers, meanwhile, are expected to put more homes up for sale, alleviating the supply crunch.

Given those factors, the bank echoes other analysts who say price appreciation likely will be much slower, or flat line this year.

“Certain factors lead us to believe the price growth will slow soon,” said Pinsonneault in the bank report on real estate.

“The number of homes on the market has been mounting since November and could continue to do so. Recent price increases and the current tight conditions on the resale market have stimulated housing starts … Once these dwellings are completed and enter the market, they will reduce the scarcity of available homes.”

Shaun Hildebrand, senior market analyst for Canada Mortgage and Housing Corp. estimates 36,000 condominiums are under construction for Toronto alone. Another 7,000 single-family homes were being built at the end of 2009.

“The big question is how many of them were purchased by investors who are going to put them back on the resale market by flipping them,” said Hildebrand.

New home sales in the Greater Toronto Area were on a tear in the second half of 2009. In December alone, sales rose fivefold from a year earlier, when the recession took hold. Overall, 2009 sales were 28% higher than in 2008.

In the condo sector, investors are back in the market buying smaller units, Hildebrand said.

Buildings sold in 2006 and 2007 are finally being completed this year due to a construction backlog. “It was difficult to get labour, then many of the buildings are more complex and taller, and then you had a credit crunch,” Hildebrand said.

CMHC said the highrise sector will be more affected by the new supply and the lowrise sector by increased resale listings.

With homeowners staying put due to economic uncertainties, many fixed “their homes up under the renovation tax credit.

“Now they’re likely to be putting their homes on the market this year.”

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Contact Laurin Jeffrey for more information  –  416-388-1960

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