Cities should take action to boost home supply
This past October, about 91 per cent of the 5,377 new homes sold in the GTA were condo apartments in highrise and midrise buildings, and stacked townhomes.
As of the end of October 2017, condos alone accounted for 82 per cent of the new homes sold in the GTA.
Are we to conclude that the vast majority of new homebuyers in the GTA now make condos their first choice for homes? The building and development industry knows that this is not the case, and that the situation in fact reflects consumers’ lack of choice.
No doubt, some buyers want and buy condos as their first choice. They value the location, lifestyle and amenities offered. Other new homebuyers see their condo as an investment that will bring in rental income.
Unfortunately, many people in the GTA are now buying condos because they simply cannot afford the single-family homes they would prefer — the average price has more than doubled in 10 years. In October, the average price for available new single-family homes, including detached and semi-detached houses and townhomes, was $1,217,428, which was 29.8 per cent above last October’s average price of $937,689, according to Altus Group, BILD’s official source for new-home market intelligence.
The average price for new detached homes was $1,548,888 and the average for new townhomes was $995,571. These prices are far out of reach for many first-time homebuyers and young families.
And that means homebuyers have been turning to condos. But even condos have become less affordable as the industry builds greater numbers of larger units to satisfy the demand from families. The average price of available new condo apartments was $677,456 this past October, which was 40 per cent above the average price of $483,656 in October 2016. This situation is leaving buyers without choices when looking for their new homes.
The main reason for the growth in new home prices is lack of supply, which, in a region that sees a net migration of 100,000 people every year, is greatly outpaced by demand. When supply does not meet demand, prices go up. While the supply of new housing — the number of new homes available for purchase in builders’ inventories at the end of the month — increased this past October and reached 12,500 units, it was still well below what is considered a healthy level. A healthy new home market should have nine to 12 months’ worth of inventory and right now inventory is at about three to four months.
With only 3,192 new single-family homes and 9,308 condo apartments available in the GTA at the end of October 2017, homebuyers were left with very little choice.
The homebuilding and land development industry strives to provide a variety of affordable housing options to new homebuyers, but we face obstacles. To comply with provincial intensification policy, we are building fewer single-family homes but demand for this type of housing has not diminished, so prices are increasing. Condo developments, on the other hand, are frequently stymied by not-in-my-backyard opposition, out-of-date zoning and lengthy approval timelines.
These challenges can be resolved if governments across the GTA take action. Let’s boost the supply of new housing and give new homebuyers real choices.
Bryan Tuckey is president and CEO of the Building Industry and Land Development Association (BILD) and is a land-use planner who has worked for municipal, regional and provincial governments. Find him at twitter.com/ bildgta, facebook.com/bildgta and bildblogs.ca.