According to findings from a strategic review of the Greater Toronto Area’s (GTA) 2013 new home market conducted by RealNet Canada and the Building Industry and Land Development Association (BILD), the GTA is facing near 10 year low levels of new home supply and sales, a near record high price gap between Low Rise and High Rise homes, and monthly sales results that suggest a market in the early stages of recovery.
“In a market where the supply of new homes must precede sales, a lack of product, obviously, results in a lack of sales,” says George Carras, president of RealNet Canada. “Simply put; you can’t sell what you don’t have. Our study of the 2013 housing market proved lower supply in the High Rise sector due to greater developer discipline, and declines in Low Rise supply caused by structural restrictions imposed on the market by Government intensification policies.”
Among the 2013 figures released in the Strategic Review, RealNet confirmed that 2013 saw the second lowest number of total sales for the decade, at 28,406. This sales total, which reflects 16,201 High Rise units sold and 12,205 Low Rise sales, was down 23 per cent from the 10 year industry average and down 13 per cent year over year.
The near record low number of sales in 2013 was driven by a dramatic slowdown in the number of units introduced to the market. The year saw only 30,054 new units (12,256 Low Rise; 17,798 High Rise) brought to market, a 22 per cent reduction year over year, and the second lowest level of new supply in the last 10 years.
“The GTA remains challenged by constrained land supply and an outdated development approvals process which delays the introduction of new inventory into the market,” says Bryan Tuckey, president CEO of BILD. “Sales of new homes today will define the jobs of tomorrow, and now is the time for the industry, consumers and government to watch the market, and watch it carefully.”
Among the conditions identified in the Report, 2013 sales totals show that more than half, or 57 per cent, of all new home sales in the GTA were High Rise, however the total number of High Rise units sold was down 13 per cent from 2012, and off 11 per cent from the 10 year average. The 2013 condominium sector also saw average unit sizes reduced by 1 per cent, to 796 s.f, and average unit prices climb by 1.1 per cent, to $548/s.f.
The 12,205 Low Rise homes sold in 2013 represented the second lowest total in the last decade, with just two sales more than was recorded in the industry’s nadir of 2008, and 12 per cent from 2012.
Last year’s Low Rise sales figures were down 34 per cent from the 10 year average.
The 2013 Strategic Review also confirmed the widening gap between Low Rise and High Rise pricing, a worrisome trend first identified by RealNet and BILD last year.
Prior to 2011, the average gap in prices between single family and multi-unit housing was $75,806. In 2013 the price gap grew to a record $226,016 in September and ended the year at $217,583, a condition George Carras calls “extreme.”
“This price gap between high rise and low rise housing is continuing to grow, a market condition that is the result of intensification policies in action,” says George Carras. The Strategic Review’s pricing data analysis shows that the Low Rise Price Index was $654,147, up nearly 3.5 per cent from last year, while the High Rise Price Index only climbed by 0.1 per cent (year over year), to $436,564.
“In today’s market, prices for the types of homes we are building less of (Low Rise) are rising, while prices for the more prevalent housing type (High Rise) remains flat,” says Carras. “The numbers demonstrate that High Rise development has become the market’s last, best hope for new home affordability in the GTA.”
Bryan Tuckey adds that there are other factors impacting the industry’s ability to deliver affordable housing, noting that, “BILD and the Ontario Home Builders’ Association made a submission to the Ontario government advocating for a land use planning system as well as the development charges system that provides an opportunity to consider streamlining improvements and ensure that municipalities are implementing provincial policy, while enhancing accountability and transparency.”
While 2013 proved to be a challenging year with forces contributing to low inventory levels, price increases and fewer product launches, the RealNet strategic review does show some positive signs for the sector’s near future. “Our analysis of the 2013 housing market data suggests growing evidence that a recovery is underway,” says Carras. The company’s Strategic Review shows monthly sales data collected for the total new home sales in December pointed to a fifth consecutive month of improved year over year results. “New home sales in December 2013 totaled 1,711, up 79 per cent from the previous year,” adds Carras.