GTA among the most promising new home outlooks for 2019, Altus Group says
By NextHome Staff
January 25, 2019
January 25, 2019
The new home sector in Canada had a challenging year in 2018, but markets in the Greater Golden Horseshoe, including the GTA, have among the most promising outlooks for 2019, according to Altus Group.Increased regulations, higher interest rates, new taxes and higher Development Charges are testing the industry, Altus Group says in its New Home Outlook for 2019.Altus Group is a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry, and tracks new home development and sales activity across the country.At the start of 2018, the supply of available new homes in both the Vancouver and Toronto markets was constrained, particularly in the condominium apartment sector. The lack of available product contributed to the rapid rise in pricing in 2017 and impacted sales volumes at the start of 2018.
In Alberta, the new home sector, along with the rest of the housing market, continued to be impacted by low energy prices and weaker economic activity. The opposite was the case in Montreal, where a sharp increase in demand for new homes led to peak sales levels.The outlook at the end of 2017 was that the market would continue to see reasonably strong demand in 2018, but sales would be impacted by the new mortgage regulations and other new policies, taxes, and regulations – the degree to which was unknown.Looking at 2018's market performance year-to-date, Altus can see that demand was impacted in the major markets, most significantly in the single-family and higher-end townhouse segments. New condominium apartment sales have also moderated in Vancouver and Toronto where the incredibly strong demand seen in 2017 has softened in the current year. Some of the moderation is normalization from the frenzied market pace noted in recent years.
In Alberta, the new home sector, along with the rest of the housing market, continued to be impacted by low energy prices and weaker economic activity. The opposite was the case in Montreal, where a sharp increase in demand for new homes led to peak sales levels.The outlook at the end of 2017 was that the market would continue to see reasonably strong demand in 2018, but sales would be impacted by the new mortgage regulations and other new policies, taxes, and regulations – the degree to which was unknown.Looking at 2018's market performance year-to-date, Altus can see that demand was impacted in the major markets, most significantly in the single-family and higher-end townhouse segments. New condominium apartment sales have also moderated in Vancouver and Toronto where the incredibly strong demand seen in 2017 has softened in the current year. Some of the moderation is normalization from the frenzied market pace noted in recent years.KEY FINDINGS
Greater Toronto Area
The GTA market came off a record new condominium apartment sales year in 2017. However, the impacts of mortgage rule changes and new development charges contributed to a decline in project launches and lower sales to start the year. Sales and project launch activity have increased in the back half of the year, but year-to-date sales remain down by almost 50 per cent compared to 2017.While sales have been lower, pricing for new condominium apartment product in the downtown area has remained fairly stable with overall average prices trending towards $800,000.New single-family sales continued to decline in 2018. Although availability of product to purchase has increased, it remains beyond the reach of most buyers.Hamilton and Kitchener-Waterloo
Markets outside of the GTA have continued to benefit from their relative affordability compared to Toronto, particularly in Kitchener-Waterloo, where the new supply of condominium apartment product experienced strong demand in 2018. Both markets benefit from markedly better pricing compared to the GTA, where lower average prices for both new condominium apartment and single-family housing makes it a much more buyer-friendly market.Promised improvements to transit, which will take several years to implement, will enhance commuting options throughout the Greater Golden Horseshoe, thus providing greater opportunities to live in markets outside of the GTA.Montreal
Montreal saw a strong increase in new home sales over the past three years and continues to experience robust demand for new condominium apartment homes. Given the growth in sales, many of the challenges seen in the other large markets have started to impact Montreal – rising costs, elevated inventories of under construction product and increased investment activity. Despite the challenges, year-to-date sales activity remains strong and is trending slightly higher than last year.Edmonton
The Edmonton market has been facing challenges from elevated inventory levels, a large stock of completed and unsold new homes and the impact that weak energy prices is having on housing demand. Consumers' mortgage qualification has become a more significant challenge for new home projects, resulting in a year-over-year decline in sales levels by almost 50 per cent for both townhouse and condominium apartment product. The slow pace of sales has also meant that several projects have shifted to purpose-built rental.While the market has been slow, there are some bright spots with development in the Ice District experiencing reasonably strong demand, along with well-priced townhouse developments in the suburban markets.Calgary
The Calgary market is performing stronger in 2018, with increased sales of both new condominium apartment and townhouse product on a year-over-year basis. This growth has been exclusively in the suburban markets where new condominium apartment and townhouse sales have exceeded 2017 numbers.While sales in the suburbs are tracking higher, the inner city and downtown markets are seeing weaker demand and lower sales volumes with higher office vacancy and lower downtown employment impacting housing demand near the core. Conversely, the strongest new home sales in the suburbs have been occurring in regions near employment centres.Vancouver
Leading into 2018, the Vancouver market was the tightest of the markets examined, in terms of available new homes with only 1.8 months of inventory. This year, new project launches, particularly along transit lines and in the Fraser Valley, have added much needed inventory and boosted the supply to 3.3 months of inventory – although this remains the lowest in the country.The frenzied pace in the market has softened with the sales rate at launch moderating, while price growth has stopped and even pulled back in certain segments of the market. A key challenge that has become more apparent as of late has been the price sensitivity of consumers, with higher-priced projects, or those priced above the competition, experiencing below average sales rates.