How to make sense of the GTA new housing market?
May 13, 2021
If you’re like me, you’ve been spending a lot more time at home over the last 14 months than you ever imagined you would. Chances are, like me, you’re tired of looking at the same old walls. Every day, you’re reminded that your current place just doesn’t meet your needs. Maybe your appliances are old, the ceiling heights are too low, countertop is stained and grungy, or your place is just too small. Whatever the case may be, you’re envisioning a brand-new home.
Perhaps you’re thinking about buying a resale property, but that is a scary proposition as well. Blind bidding wars, waving conditions, worrying about financing and appraisals in short order. No thank you.
It is nice to walk into a sales office, see the list of prices for various homes, see the numerous options and choice. You don’t have to worry about negotiations or paying a price significantly higher than your neighbour for the same home. You can compare those prices and options to other new housing developments, and make a very informed decision.
The big factor, obviously, is the market. Is it going up? Is it going down? Should I be worried about it?
According to the latest new home data from the Altus Group, 5,003 new homes sold in March 2021 in the GTA, up 27 per cent annually from March 2020. This figure was 37 per cent above the 10-year average for the month of March. It is always nice to know others are confident about the market moving forward.
Condominium units accounted for 3,297 of the new sales in March, up 11 per cent year-over-year. This figure is 42 per cent above the 10-year average, and the second highest March total over the last 20 years. If you were worrying about an urban exodus out of Toronto, you can see that GTA investors are still betting big on the highrise market, and believe the provincial capital will continue to be an economic hub of activity and immigration.
According to rentals.ca, the average rent in the GTA increased in March over February, the first increase since January 2020. Rent per sq. ft. increased for all bedroom types month-over-month in downtown Toronto. Condo investors are taking note – the slump in the rental market may be over, another encouraging factor for future landlords.
New single-family home sales totaled 1,706 in March 2021, up 75 per cent from last March, and 27 per cent above the 10-year average. The desire for more space, both outside and inside the home, has resulted in many young families accelerating their move-up timeline during the work-from-home and learn-from-home pandemic period.
Supply and demand are key to understanding price movements in the new home market, and the data above clearly shows how strong demand is. On the supply side, remaining inventory for all new housing types in the GTA decreased in March to 11,471 units from 12,095 in February. Unsold inventory was 13,933 in March 2020, so available supply is down 18 per cent annually.
We know about demand-push inflation; higher demand without an equal increase in supply leads to higher prices. However, we are also experiencing cost-push inflation, as the supply chain is disrupted due to COVID, and material costs have skyrocketed. Depending on your source of data, lumber prices have doubled or tripled over the past year. If a developer has higher costs, they pass on those increases to the purchaser to maintain their margins.
New home price inflation has been very strong in 2021. The Altus benchmark price for new single-family homes in the GTA rose to $1.44 million, up 29.4 per cent over the last 12 months, while the benchmark price for new condominium units rose 8.3 per cent to $1.06 million.
It certainly seems risky to buy when prices are rising so quickly, but I always say that it is very important to stay within your budget, know what your monthly costs will be and try not to make any rash decisions. If you can see yourself living in this home for the next five years, you should be safe as it relates to short-term price volatility or price corrections. Surround yourself with a knowledgeable team, a realtor and a mortgage broker, and do your own research as well. Good luck!
About Ben Myers
Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with landowners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at bullpenconsulting.ca