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Move to suburbs can’t offset condo sales slump
August 24, 2010
Tony Wong
BUSINESS REPORTER
Earlier this year Julia Rudberg purchased a new condominium in downtown Markham. It was a move she likely wouldn’t have considered only a few years earlier.
“When you think of condo living, you think of downtown Toronto, not the suburbs,†says Rudberg, a 48-year-old nurse. “But if you look at the town today, there’s a lot more happening than before.â€
In what builders are saying may be the sign of an emerging trend, nearly half, or 46 per cent, of new condominiums purchased in July were in the suburbs. Traditionally, the city of Toronto commands an 80-per-cent share of all highrise sales.
All the more remarkable is that highrise projects in bedroom communities such as Markham, Brampton and Pickering were few and far between 10 years ago. Single detached homes have been the bread and butter of the suburbs, accounting for more than 80 per cent of new home sales.
But the Greater Golden Horseshoe Growth Plan, which touts higher densification for the 905 region, combined with affordability issues and a greater acceptance of highrise living, have made condos desirable for many suburban buyers.
Rudberg says she purchased her condo, the site of a former farmer’s field, because it was within walking distance to stores and transit. “The infrastructure is there, and you’re not in the middle of nowhere anymore,†she said.
While the trend is positive for condo builders who have trouble finding sites in the downtown core, the pickup in highrise sales in the suburbs was not enough to offset an overall decline in home sales.
According to figures released by the Building Industry and Land Development Association, new home sales took a beating in July, down 42 per cent overall. Most of that drop was in the more costly single detached sector.
“New home sales remain soft, with a big difference in the low-rise and highrise sectors,†said housing analyst Will Dunning.
Highrise sales slipped by 10 per cent in July to 1,222 over last year’s 1,358. But prices for an average condo remained up by 10 per cent to $430,782, compared with $391,673 last July.
A lack of inventory and land available for low rise saw sales drop significantly by 65 per cent to 678 sales, compared with 1,924. The average price for a low rise home is now up 9.2 per cent from last year to $489,088.
Another reason for slowing low rise home-sales is that the 905 economy is weaker than the 416 economy, which has more high-paying jobs such as those in the financial sector, said Dunning.
Nearly two-thirds of sales in July were in condos, compared with the norm of about 50 per cent, said BILD. Analysts such as Dunning have repeatedly warned that as more people rush to condos, there is a danger of overbuilding in the sector.
Tighter mortgage regulations and the impact of a new Harmonized Sales Tax that came into effect the beginning of July are expected to continue to hobble the new home market in the second half of the year.
The resale market, meanwhile, has already been showing significant signs of slowing, with sales in the Toronto area down by 29 per cent in the first two weeks of August.
