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An announcement made by the Building Industry and Land Development Association (BILD) this week reveals that demand for housing in the Greater Toronto Area is showing no signs of slowing down. The average price of new low-rise homes is up 22 percent from last year, reaching a new high of $992,231 in the month of September and up $60,000 since the month of August of the present year.
For new detached homes alone, this figure rises to $1,194,771 on average, a figure that has forced many larger households to enter the high-rise housing market. Indeed, sales of new high-rise units have reached record levels, representing nearly 60 percent of the GTA’s 34,736 new home sales this year. Prices of new high-rise units in the GTA are up 10 percent from last year, to a record high average of $486,605 in the month of September.
As expressed by Brian Tuckey, President and CEO at BILD, the rise in new high-rise home prices is mainly driven by an increase in the supply of larger condominium units in the market, a move that seeks to target households who have been priced out of the low-rise home market. This trend is reflected in the average size of high-rise units in the Greater Toronto Area, which increased by 42 sq.ft. to 809 sq.ft. from last year's average of 767 sq.ft. As year-to-date sales of low-rise homes are down 8 percent last year's figures, sales of high-rise units are up 37 percent in the same period.
The existence of land-use regulations designed to protect the natural environment of the region (such as the Ontario Greenbelt Plan and the Oak Ridges Moraine) has had an undeniable effect on land prices, as highlighted by BILD. The lack of shovel-ready land to build extensive housing complexes in the Greater Toronto Area has pushed developers towards the construction of high-rise buildings with larger units, a move that has allowed new high-rise unit prices to remain relatively stable vis a vis the rapidly escalating average prices for low-rise homes.
Given the high demand for housing in Toronto, the average price of homes in the region is showing no signs of decreasing in the near future. According to figures released by BILD, the inventory of available high-rise units is down 35 percent this time last year, and the availability of low-rise homes has decreased from nine available homes for every one sold in 2009, to just under two units available for every low-rise home sold in the present year. The increased demand for housing coupled with a reduced supply of new low-rise homes due to land-use regulations is certain to keep the price of the latter escalating over the next few years, forcing many households to seek units in high-rise buildings and thus increasing the demand for more affordable condominium units.
Although alarming for their potential to exclude low-income households from desirable neighbourhoods—and specifically the downtown core—these figures suggest that a vast increase in the supply of high-rise units of diverse size is needed to absorb the growing demand for housing in the region. This phenomenon could thus lead to the intensification and densification of less-built areas outside the city centre, allowing for the inner suburbs and other stagnant neighbourhoods to welcome mid- and high-rise building construction.
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What do you think of the rising home price sin the Greater Toronto Area? How have these issues affected you and your community? Feel free to leave a comment in the section below expressing your thoughts.
