Millennials being left out in the cold by new rules
Think the GTA real estate market is at an unprecedented low in the supply of new houses?
You are correct. And based on plans proposed by the Ontario government earlier this month, the market will be getting even tighter.
A decade ago, the province introduced its Greenbelt and Places to Grow policies, setting a minimum 40-per-cent intensification target for residential development. That means for every 10 new homes created in the region, four have to be of the high-density variety.
The GTA housing market has responded accordingly. Over the last decade, supplies of traditional ground-oriented homes, detached houses especially, have dwindled to record lows, while prices, given the growing scarcity of the product, have hit record highs. (It feels like a broken record hearing about broken records in detached home prices.)
As of the end of March, the remaining inventory of new lowrise homes in the GTA — the product that’s available for people to purchase right now — reached a record low of 3,036 homes, according to Altus Group. Meanwhile, the average price of a new detached home soared to a record high — over $1 million — while the price gap of a detached home over a new condominium apartment widened to a record $561,134.
Earlier this month, the province announced its intention to further increase minimum intensification targets, from 40 per cent to 60 per cent, a move that will widen that existing price gap even further. (Note the definition of intensification, as per Merriam-Webster’s dictionary: “to make (something) stronger or more extreme.”)
While supply is impacting price, so too is demand.
The commonly held conception that the majority of future housing demand from millennials will be for higher density homes in downtown areas is a myth that’s just been busted.
According to Altus Group’s most recent FIRM survey of consumers, only 40 per cent of millennials (and 41per cent of baby boomers) said they would prefer to live in a smaller home in a central area than a larger home in the suburbs.
So the housing demands of millennials is not that much different from that of their baby boomer parents.
That’s not to say young folks don’t want to own condominiums or townhomes, but the Altus survey shows demand for traditional housing is almost equal.
The reduction in future supply of traditional homes that will come as a result of the province’s proposed plans will have a meaningful impact on the market in two ways.
For those looking for a new ground-oriented home, options will be more limited, farther away and increasingly expensive. For those who own a ground-oriented home, that house’s value is likely to rise as the price of the housing stock is impacted by the market’s flow — or lack thereof. Remember: every home on the market now was at one point a new home.
Community development is not a spectator activity and the provincial government welcomes your input about its proposed plans. Tell them what you think at ontario.ca/landuseplanningreview. George Carras is the president of RealStrategies Inc. and the founder of Real Net Canada Inc. (now part of Altus Group). His column appears in New in Homes & Condos once a month. For more information, visit realstrategies.ca.