Consumer confidence plays an important part in any market, and the new homes industry is no exception.
The federal government has recently been working on reducing household debt levels, with Finance Minister Jim Flaherty frequently expressing his desire to cool sales of new homes. In mid-July, adjusted mortgage lending rules came into effect and it appears these regulations have affected consumer confidence, resulting in significantly reduced sales of new homes.
After the first full month under the new rules, new home sales in the GTA added up to the lowest monthly total since 2009 and the lowest August on record at 1,242 sales.
Of course one month of reduced sales doesn’t signify a new trend, particularly in August when sales are naturally lower than the rest of the year. Having said that, we’ll be keeping a very close eye on new home transactions in the coming months to analyze the potential impact this could have on the economy.
As BILD Chair Paul Golini mentioned earlier this week, consumer confidence in the new homes market is crucial to a healthy economy, particularly in an industry that employs more than 75,400 people in the City of Toronto alone. That number jumps to 193,000 jobs across the GTA, and 856,000 nation-wide, making it one of the largest employers in the country and an enormous factor in Ontario’s strong economic recovery in recent years.
It’s important for the federal government to spread confidence in the industry, explaining that the market is healthy and returning to stability following a banner year in 2011. It is also imperative that the provincial government addresses the issue surrounding the diminishing housing supply in the GTA market. As a result of Ontario’s emphasis on intensification, pricing for low-rise homes has increased dramatically, limiting choice in housing options and affordability for many homebuyers.
With interest rates still remarkably low and incoming new transit corridors already in the works, the new homes market in the GTA is still looking positive and we look forward to seeing the sales figures over the fall months.