Housing market growth is on the highrise
Good job market and attractive interest rates are contributing to affordability
Excerpt from an article by Theresa Boyle, Real Estate Reporter, Toronto Star
The GTA condominium market continues to be buoyant, despite increasing concerns of a housing market slowdown in the United States and slumping low-rise sales in Canada and the Greater Toronto Area.
Affordability is allowing the GTA condo market to buck the trend.
Condominiums continue popping up at the expense of new low-rise housing, including detached and semi-detached houses and townhouses.
Condos are making up a greater proportion of the new development market share in the GTA. And for the month of June alone, they broke a record by comprising the majority of all new residential developments.
“I think the condo market in Toronto is remarkable. There is nothing like it in North America,” says Desi Auciello, president of the Greater Toronto Home Builders’ Association.
“Within the last two years, condos took basically all of the first-time buyers out of the low-rise sector. Still believing that ownership is the way to go, they moved into affordable small condominiums,” he adds.
The high price of low-rise houses is driving many out of that market and into more affordable condos. The GTA new home price index in July stood at $392,138 for low-rise homes and $312,966 for highrise apartments, according to the GTHBA.
There have been 11,071 highrise condominium units sold in the GTA so far this year, compared to 10,854 at the same time last year, for a 2% increase, according to the GTHBA.
While the Canada Mortgage and Housing Corp. reports that construction of new condos is down 8% so far this year, the federal housing agency predicts the numbers will pick up by year end.
Heading in the opposite direction are sales of single-family detached houses, semi-detached houses and townhouses. So far this year, 15,536 low-rise homes have been sold in the GTA. That compares to 13,766 last year, for a drop of 13%.
While highrise sales made up 41% of the market share at this time last year, they now comprise 45%.
“Fewer and fewer first-time buyers can get into that kind of housing so they do turn to that condo apartment market,” says Jason Mercer, senior market analyst with the CMHA.
As of the end of July, there were a whopping 255 new condo projects on the market in the GTA, according to Urbanation, a GTA condo market research firm.
Housing start figures tell the same story. The CMHC forecasts that construction will start on 40,400 low-rise and highrise homes in the GTA this year. That’s down 3% from last year. Still, the number of highrise condo starts is expected to continue increasing, with 15,500 to 16,000 permits forecast to be issued this year, up from 14,376 last year.
Auciello says the provincial government’s restriction on building on the greenbelt surrounding Toronto is driving up the price of land and forcing many purchasers into condos rather than low-rise homes.
In contrast, someone can afford a condo, in a great location, on a modest salary, Shim argues.
A household salary of $63,000 can get you an average new, two-bedroom, 700-square-foot, $231,000 condo in the GTA, she says. (This presupposes a 25% down payment and a five-year fixed rate mortgage amortized over 25 years.)
For example, you can buy a 516-square-foot studio in VU, at Adelaide and Jarvis Sts. for $158,990. A 400-square-foot studio at the Residences of Maple Leaf Square, adjacent to the Air Canada Centre, can be had for $197,900.
A good job market and attractive interest rates are contributing to the affordability of condos, she says.
The increasing number of highrise condo developments is changing the face of the GTA, from Toronto’s waterfront to the 905.
More than 101,000 condominium units and 627 new buildings have been erected in the GTA in the past decade, according to Urbanation.
Shim says Toronto’s skyline is one of the most impressive in the world, thanks in a large part to new condo developments.
“Residential condominium apartment developments have really played a key role in transforming our skyline … Most of the new buildings in our skyline are residential condominium buildings,” she says.
Over the last decade alone, some 3,600 new condo units have been created along Queens Quay, according to Urbanation. With an average of 1.5 residents per household, that’s an additional 5,400 people living on the waterfront.
“None of these new grocery stores would have appeared had it not been for new condominium residents moving into these areas and naturally requiring new retail services,” Shim remarks.
“Wherever there are new condominium projects, there are new full-time residents requiring services such as grocery shopping, dry cleaners, restaurants and cafes. Only condominium apartments can introduce the critical mass of people needed for new businesses to move into a neighbourhood,” Shim says.
In the 905, new “suburban downtowns” have been created, thanks to condo developments. These include central Mississauga where the highly touted Marilyn Monroe building is going up, and the massive development in York region known as “Downtown Markham.”
The GTHBA says the “great condo craze” took on a new dimension in July as sales of highrise condo suites skyrocketed in the 905. While highrise unit sales were up 9% across the GTA in July compared to the same time last year, they increased by 260% in Peel region and 215% in York region.
“The City of Toronto will continue to represent the solid core of the condo market, particularly as the waterfront lands come on stream, However, the 905 regions are coming on strong,” he adds.
“We are seeing the demand for condominium apartments as the children of the baby boomers move out of the family home and as the baby boomers themselves start to age. Given that most of the new job growth in the past 10 years has occurred in the 905 areas, it is not surprising that younger buyers, in particular, are choosing to stay in the 905 areas, closer to work and family,” she explains.
As for where the condo market is going, observers say it will remain strong but likely won’t keep pace with recent record highs.
“A shrinking but healthy pool of first-time buyers looking for less expensive homes, combined with provincial government efforts to promote higher density construction, suggest condominium apartments will remain in demand,” states the report, which goes on to forecast that multiple starts for the province will fall slightly to 37,500 next year from a projected level of 39,500 in 2006.
“Things are tapering off and moving closer to the 10-year average,” says, the CMHC’s Mercer, noting that construction has started on an average of 8,989 condo apartments in the GTA in the last decade.
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