New Home Builds Surpass $1 Million in the Greater Toronto Area
It's no exaggeration to say that an incredible amount of ink has been spilled on the subject of wildly escalating house prices in Oakville, Burlington, Milton, and the GTA.
Well, we're about to spill some more.
According to a recent Building Industry and Land Development Association (BILD) new release, the average price of available new single-family, ground-oriented homes (so low-rise houses, not condos) in the GTA has surpassed $1 million.
BILD reports that in January, the average price of new single-family low-rise homes, (detached, semi-detached, row and townhomes) increased to a new record of $1,028,395.
That means that prices of new ground oriented homes grew 25 per cent in just one year.
According to BILD, the average price of a new detached home increased to "an unprecedented" $1,316,325 in January. Compare that to 10 years ago when the average price was a much more affordable $444,368.
Unfortunately, people looking at smaller low-rises aren't going to fare much better.
BILD reports that the average price of a new GTA townhouse was $879,619 last month— compared to $328,989 in January 2007.
So, what's causing this massive price increase? The same thing that's making resale homes sell for astronomical prices—incredibly low inventory.
"The GTA is facing a severe shortage of housing supply, particularly for single-family homes which sell as soon as they come to market," said BILD President and CEO Bryan Tuckey. "When there aren't enough homes to satisfy demand, prices increase and that is exactly what has been happening in our region over the last decade."
Lack of inventory is indeed a persistent problem.
BILD points out that there were just 1,524 new ground-oriented homes available for purchase at the end of January, a near record low.
At this time 10 years ago, there were 18,400. BILD also notes that the supply of new detached homes declined to 534, the lowest ever recorded in the GTA. In 2007, there were 12,242.
While condos remain a more affordable option for buyers looking to enter the market, prices in that market are climbing too.
According to BILD, the average price of new condo apartments in stacked townhouses and mid and high-rise buildings reached $507,511 in January, (that's also a new record).
Also, the average price per square foot reached $625. Basically, new apartment prices have grown 13 per cent since January of last year, increasing by almost $60,000.
A decade ago the average price was $322,569.
"Our industry is implementing provincial policy by building more condominium apartments and less ground-oriented housing," Tuckey said. "A decade ago condominiums represented just 42 per cent of available inventory compared to 88 per cent in 2017."
You might also recall dire warnings about the foolishness of condo ownership that prospective buyers heard from concerned relatives and media outlets alike for much of the early 2000s. When condos started popping up like weeds in Toronto and its satellite cities, people warned that an oversaturated market would cause property values to plummet, leaving owners with huge mortgages on near-worthless properties.
So far, that doomsday scenario has not come to pass.
"After years of healthy supply, the number of new condominium apartments available for purchase began to decline," BILD writes. "In January 2017 there were 11,529 new condominiums in builders' inventories across the GTA, which is a 10-year low."
Despite warnings about condos, people are buying them. BILD reports that new condo sales were the strongest recorded for a January, following a record year in 2016.
"Demand for condominium apartments is coming from a variety of sources," said Patricia Arsenault, Executive Vice President of Research Consulting Services at Altus Group. "Among them: end users who prefer the locations and amenities afforded by condominium apartments; families who might have opted for a single-family home, but have been shut out of that segment due to lack of available product; and investors who are the key providers of new rental supply for the GTA's growing population."
BILD reports that sales of new single-family homes declined to one of the lowest Januaries in the last decade. There were 741 homes sold across the region, of which only 369 were detached.