Understanding the new normal in the housing market
George Carras – Yourhome.ca
It’s tough to appreciate a new condominium building without standing back from it to gain some perspective. It is equally as difficult to assess what’s happening in the new condominium market without having a similar kind of perspective.
There’s a lot of discussion about the GTA’s new condo market these days, and all that talk can be both healthy and dangerous.
The market does not exist in a vacuum; it is one part of a total new home market that serves the GTA’s rapidly growing population, guided by a provincial policy that is directing the region to grow up, not out.
Builder inventories are an important gauge used by industry professionals to assess the state of the new home market.
Remaining inventory is a measure of the total number of units left unsold at the end of each month in sales centres across the GTA, whether those units are in pre-construction, under construction, or built and unsold.
Lowrise projects are ground-oriented housing projects, like detached homes, semi-detached homes, townhomes and links. Highrise projects are more intensified residential developments, such as condo apartments, lofts and stacked townhomes.
On a monthly basis, RealNet — the official source of new home information for the Building Industry and Land Development Association (BILD) and the Toronto Real Estate Board (TREB) — researches every new home development in the GTA with more than 15 units, both lowrise and highrise.
As of March 31, RealNet’s Highrise Remaining Inventory — which measures the number of unsold units in the GTA — grew to a near record high of 18,369 units.
For a bit of perspective, note that while highrise inventories have returned to the near record high levels set in the fall of 2008, lowrise inventories during that same time period have plummeted by 61% to a near record low of 6,302 units.
Over the long term, total remaining inventories in the GTA — the number of unsold highrise plus lowrise units — has normally been between 25,000 and 30,000 units. The rise in highrise inventories in March led to a 24,671 rise in total inventories.
This represents a new kind of normal for the GTA market. Ten years ago, while the total number of units in builder inventories was roughly the same as today, the composition of that inventory — that is, the types of homes available for consumers to choose from — has become dramatically different.
In March 2002, lowrise homes were the dominant form of new home offerings, representing 65% of total builder inventory. In March 2012, while the GTA housing market is at roughly similar levels of total inventories, there has been a complete reversal in the dominant form of the inventory, with highrise options now representing 74% of builder inventories.
There will always be housing cycles, but what the GTA market has been experiencing is a structural shift away from lowrise housing and toward highrise living. Recognizing that distinction is key for anyone aiming to understand this new normal.
Contact the Jeffrey Team for more information – 416-388-1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
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