Haydain Neale, 1970–2009
Transit City and Transit Cities
Peeve Patrol
Newsstand: November 23, 2009
The Making of a Medley
Photo by Stephen Michalowicz/Torontoist
The economic downturn has taken a toll on Toronto’s housing market. In comparison to 2007, November housing sales in the GTA were down 50 percent, and new high-rise condo sales, once the bedrock of Toronto's housing market, declined 31.6 percent this year. The average sale price for a house in November fell by $43,500, while the average condo price fell by over 10 percent. So what awaits the market in 2009? Unfortunately, more doom and gloom.
Photo by Stephen Michalowicz/Torontoist
While the housing industry is unlikely to collapse—Canada isn’t facing as large a credit crisis as the U.S.—its decline will have grave consequences for Toronto’s economy. Estimates indicate that the industry annually contributes more than two billion dollars to the city's economy and is linked to six percent of the regional GDP. The housing construction industry alone employs approximately 143,300 people and when multipliers are factored in, the industry accounts for 12-14 percent of the jobs in the GTA [PDF]. There are also countless financial institutions and real estate companies that employ thousands of Torontonians and as loses mount these companies are going to start laying-off employees. In fact, lay-offs in the construction industry have already begun: Statscan reported that in December 44,300 jobs were lost in the construction sector nationwide.
Weak sales will also have a negative impact on consumer spending and city revenues. According to statistics compiled by the Clayton Research Association, the average sale of a house in Ontario generates twenty-seven thousand dollars in spin-off spending [PDF], on items like furniture, appliances, and renovations. (This figure includes the fees that real estate lawyers and brokers receive—direct homeowner spending is closer to $13,500.) Furthermore, the city of Toronto depends on property taxes for a substantial portion of its revenues—if housing prices continue to fall, the city will ax jobs and programs to make up for the budget shortfall. Now that the good times of the housing boom are over, it looks like we're all going to feel the pinch.
This article mistakenly said that "condo sales, once the bedrock of Toronto's housing market, declined 31.6 percent this year"; in fact, as noted in the comments, only new construction high-rise condo sales declined by that figure.
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Thanks for the article. Lots of good links provided.
Gotta be careful with what stats you are reporting, though. The decline of 31% in the number of condo sales you refer to was for new construction, high-rise condos only, for the months of Jan-Nov 2008 when compared to Jan-Nov 2007.
The stat quoted of condo prices falling by more than 10%, was referring to an article I wrote about downtown condos only and was comparing Nov 2008 prices with Nov 2007 prices.
Cheers,
Andrew la Fleur
Where are you getting $43,500 for November?
$393,747 - $368,693 = $25,162 comparing November 2008 to 2007.
Jan-Nov decline was even smaller, but is discounted because the start of the year was still strong.
Now, there WAS a $44,055 drop in the first have of Dec, but not Nov.
Regardless, this is just the beginning. The numbers come the spring should be scarier.
The housing comparison is between November 2007 and November 2008.
November 2007: $433,859
November 2008: $390,225
= $43,634 ($43,500)
The 10 percent decline in condo prices is also a comparison between November 2007 and November 2008.
Toronto Condo Dude is right. The 31.6 percent decline is in reference to new high-rise condo sales only.
Sorry for the delay in updating this article; I appended a correction above about the condo sales figure.
this post should be titled "desperate real estate agents"...and by the way, i heard the city is going to lower our assessments to reflect declining prices...
If house prices fall, why would the city's tax revenue go down? Property taxes would remain the same.
The city’s budget assumes that a certain amount of revenue will come in from the property taxes on new condos, housing developments, etc… If housing prices continue to plummet, then fewer housing projects will start or reach completion and the city will have to revise its budget.
Wouldn't the millrate change then so that the same amount of tax is raised?
My heart is filled with joy at the news.
Now, Toronto-old city Toronto, with all the old architecture that's been destroyed by big, super-expensive condo development-can breathe easier. This city has been the epicenter of greed and and big box bullshit for years, with overreaching commerce a factor in the destruction of great buildings of our past, as well as great small businesses, and replacing them with every god-damm chain store known to man (the burning down of Queen West would have brought such a monstrosity to the part of Queen West where the fire happened.) Now, the brakes have been engaged, and perhaps Toronto can get a little breathing room to be a livable city that isn't overrun by super-expensive condos costing more than most people can afford, spinning off big box retail and blocks of cookie cutter chain restaurants in their wake. Now, small businesses and non-chain restaurants, and all the other kind of independent businesses that made being in this part of Toronto cool can exist again, without having to worry about being forced out. No more cookie cutter corporate culture because of these condos-instead, better culture. No more having to worry about Kensington Market being overrun with the same above- mentioned chains, because they won't be there-all thanks to the recession! Hooorah!
Life is about to get interesting in Toronto, folks, and the recession is to thank. It might be shabby, but it'll be more human.
Toronto housing starts are +32% to date this year versus the first two-thirds of last year. The strength continues to be in multi-unit starts (+70%), whereas single-family starts are on the decline (-15%). The Toronto multi-unit market is comprised to a significant degree of high-priced condos being bought by wealthy foreign investors and well-heeled empty-nesters relocating downtown from their homes with a yard in other ritzy neighbourhoods. The strength in toronto corporate housing has raised Ontario (+20%) to be the leader among all of the provinces in year-to-date total starts.
The other city with a million-plus population to show particular strength in multi-unit starts has been Calgary (+55%). Also in this large-population category, Montréal and Vancouver have tied for percentage gain in multiples at +11% each. In centres below one million population, Kelowna (+63%) and Hamilton (+52%) have demonstrated impressive increases that have raised actual volumes above 1,000 units.