The Shift Hits the Fan in the housing market
By Michel Rémy
The results of decisions made by Ontario provincial ministers in 2005 when they decided to intensify housing in Toronto’s downtown core are only becoming visible now.
“The Growth Plan for the GTA is intensification, which means taking a grow-up-not-out approach to development. Everyone can see the growth in what we’re shifting to through high rise development but the problem is no one ever really talks about the decline in low rise development and what we are shifting away from,” says George Carras, the president of RealNet Canada Inc. “A proper understanding of the condominium market requires the context within the total housing market. A decade ago consumer new home choices were three low rise options for every one high-rise, today it’s a total inverse.
As low rise homes became scarce, their prices increased and they are continuing to increase by 14.5% a year now. The prices of condos have decreased slightly but mostly because the unit sizes have decreased.
“The trend started when HST was introduced in 2009 and builders had to keep costs down,” said Carras. “The index size of a new condo is about 120 sq. ft. smaller today than it was in 2009 – that’s a ten by twelve room that has been removed from the average condo today vs three years ago”
As a result of this shift in housing form, the price gap between a new condo and a new low-rise home has more than doubled from $78,000 a few years ago to $177,000 today.
For more natural and geographic reasons, Vancouver has been experiencing the impacts of intensification for over two decade and in both markets, condominium development has filled the need for rental housing created by the lack of purpose-built rental units.
“When you compare downtown Vancouver and downtown Toronto from an end price perspective, and you factor in parking, those markets are now similarly priced in terms of price per square foot,” says Carras. “The difference is the land price. The land price in Vancouver is approximately double that of Toronto. In Vancouver, the price declines that have been coming out recently are not borne out of the condo space, they are borne out of the rapid rise in the low density resale homes. That rapid run up is now retreating. The condo market in general has been running stable.”
Note: This article appeared on p 68 of Canada’s Leading Real Estate Forum Magazine, Toronto, Winter 2012
