The impacts of low new home sales in 2023 will be felt for years

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With higher inflation and interest rates, buyers are sitting on the sidelines

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By the time December draws to a close, 2023 will go down as one of the worst years for new home sales in the Greater Toronto Area (GTA) in recent memory. In fact, you would have to go back almost three decades to 1995 when combined sales of condominiums and single-family homes were lower. As housing starts lag preconstruction sales — in some cases by years for high-rise condominium apartments — the seeds of continued supply and affordability challenges have already been sown.

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The industry’s business model is based on pre-construction sales. With higher inflation and interest rates, buyers are sitting on the sidelines and project financing is becoming increasingly difficult. The net result is sales this year are half of the average sales of 35,000 to 40,000 new homes sold in a typical year. Lower pre-construction sales  means in the next few years we will see far less supply, in the form of new starts, coming on stream at precisely the time that we will need it the most.

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There is no doubt we have a significant housing supply shortage in Ontario and across the country. Rapidly expanding demand due to population growth and an under supplied market have led to price escalation and an erosion of affordability. To meet the provincial government’s target of adding 1.5 million homes by 2031, we collectively must outperform the current building rate and deliver 65,000 to 70,000 homes in the GTA per year, every year.

As 2023 ends, we are at a critical point in the debate on housing supply. There is a broad consensus that more housing needs to be built. However, we must address the headwinds that the industry is facing to deliver this much needed housing to the GTA. The top five factors that must change to add more supply and address structural affordability challenges are straightforward; interest rates must moderate, more land must be designated for growth, more housing supportive infrastructure must be built, new homes must be taxed fairly and the process to cut red tape associated with approvals of new housing projects must be expedited.

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The historic low sales we have witnessed this year cannot become the norm. Governments, communities and our industry must redouble our efforts to create necessary change. The decisions we make today will determine the type of economy and society we build for tomorrow. For its part, BILD will continue to work with municipal, provincial and federal governments to ensure the right policy framework is in place to get on with the job.

Dave Wilkes is President and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA. For the latest industry news and new home data, visit www.bildgta.ca.

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