How will new home construction in Prince Edward County affect housing prices in the years to come?
The big news in the first quarter of 2019 is that new construction is impacting County real estate, a trend which will continue for years to come.
The number of re-sale homes actively listed during the first quarter of 2019 grew by 11% over the year before. This growth in supply is welcome news for buyers, but it’s only part of the story.
When listings for new home construction are included, total listings are up 68% over last year.
New Attitude to Development
Until recently, new construction had a limited effect on the supply of homes in the County. Developers had complained for years about the excessive costs and delays to build in the County. That changed to a significant degree under the last (pro-development) Council.
As a result, development has increased markedly. Based on the developments announced so far, there are more than 1,500 new residences at various stages in the planning process. (More on this in a later article.)
Even if only a thousand of these units are actually built over the next ten years, that’s still 100 new homes a year which must get sold. To put that in context, the County is a small market with around 500 home sales in a good year.
New Home Listings
Three developments currently have shovels in the ground, and these new homes have started to show up on the market. During the first quarter of 2019 there were an average of 109 active MLS listings for new construction, up from a handful at the same time last year.
Most of the MLS listings for new construction are actually for homes that haven’t been built yet. As a result, the flood of these new construction listings has a smaller consumer impact than the numbers would suggest.
Still, this is the start of a flood of new construction listings which will add to the housing supply in the County. If development proceeds as planned, new construction will affect housing prices for years to come and potentially limit the increase in real estate values.
Given the weakness in the Toronto market, it not surprising that the demand for County real estate has moderated. Sales of re-sale homes fell by 4% compared to the same time last year. However, when sales of new construction are included, total sales were up 4% compared to last year.
Days on Market
With re-sale listings up 11%, and total listings (resale and new construction) up 68% over last year, supply is growing much faster than demand. As a result, homes stayed on the market 46% longer than in the first quarter of 2018.
Selling to Listing Price Ratio
Despite the increase in supply, County homes continued to fetch, on average, 98% of listing price, effectively unchanged from last year.
The fact the ratio stayed the same may seem surprising. Rapid growth of supply would normally strengthen the buyers’ position, leading to a deeper “discount” from listing price. In this case, the ratio may have stayed the same because sellers have become more realistic in the prices they are asking for.
The median price for all homes (re-sale and new construction) sold in the first quarter was down $4,000 from last year. This is the same median price for the first quarter in 2017.
Demand is up slightly; listings are up more (much more if you include new construction). Houses are taking longer to sell, but prices are largely unchanged from last year.
Top image credit: Jun Zhang
Treat Hull spent three decades as a management consultant and marketing executive before moving to the County and taking up real estate. He is broker/owner of Treat Hull & Associates Ltd., a Prince Edward County brokerage which takes no listings and represents only buyers.