Real estate markets respond to the policies put in place by government. And the GTA new home market in recent years has been all about intensification in action.
Consumers can only buy what they can afford, and what builders can sell. In turn, builders can only sell what consumers want and can afford and what the government allows them to build.In the mid-2000s, the Ontario government introduced policies, the Greenbelt and Places to Grow, that have been fundamentally reshaping the growth of the GTA through intensification. In accordance with these policies the region has been growing up, not out.
To appreciate what’s happening in the GTA new home market in 2013, it should be understood that it’s been all about intensification in action.
There were 11,082 new home sales in the first five months of 2013, the second-lowest total in the last decade. The lowest total was recorded in 2009, in the depths of the financial crisis.
The price gap between a low rise home detached, semi-detached, townhomes and link homes and a highrise home reached a record high of $212,000 at the end of May.
Year-to-date highrise sales as of May 31 were down 13 per cent from the long-term average and their prices were down two per cent from last year. Meanwhile, sales of lowrise homes are down 43 per cent from the long-term average, but their prices are up six per cent from last year.
An obvious trend has resulted from the intensification of the housing market: the average price of the homes we’re creating more of highrise is flattening, while the average price of the homes we’re making less of lowrise is increasing.
Intensification is not just affecting the new home market; it will have a significant effect on the overall GTA real estate market.
If you think about it, every home today was at one point a new home, and that home was built under the land-use regulations of the time.
Two important questions emerge here regarding the future of the Toronto real estate market: Will the GTA continue to grow, and will the province continue to promote an intensified approach to development?
If you believe the answer to both of those questions is, “Yes,” then prepare for real estate that will increasingly be taller, smaller, and, unfortunately, more expensive.