RealNet Canada Inc. and its partners at the Building Industry and Land Development Association (BILD) released a strategic review of the GTA’s 2011 new home (low rise and high rise) markets, reporting 45,926 new home sales, the second highest yearly total in the region’s history, representing approximately $22 billion of real estate.
Among the review’s key findings were significant increases in both high rise and total new home sales, an increase in high rise market share in the 905 Region and an increase in the low rise new home index price. The review also illustrates decreases in the high rise new home index price and unit size as well as the shrinking supply of new home options for consumers.
“The shift really hit the fan in the GTA in 2011,” said RealNet Canada’s president, George M. Carras. “The trend towards high rise housing forms, over more traditional low rise product types, continued in 2011 as the sales of high rise new homes reached a yearly record of 28,466 units totalling $12.7 billion.
“While most Torontonians didn’t miss the growing number of new condominium sales centres, hoarding, construction cranes and new towers appearing across the GTA, they may not have noticed the shrinking number of traditional new subdivisions and the shift in new housing that’s taking place” added Carras.
In 2011, the industry saw new high rise home types reach a record high 62 per cent of all new home sales, while the low rise sector reached a record low 38 per cent, with a total of 17,460 sales representing $9.3 billion. Apartment condominiums outsold traditional detached homes three to one. These numbers stand in stark contrast to the GTA new housing numbers just over 10 years ago. In 2000, low rise new home sales were approximately 75 per cent of the market (high rise new homes represented the remaining 25 per cent) and the sale of detached homes outsold condominium apartments two to one.
“While total yearly new home sales remained relatively constant over the last 10 years, the GTA has seen a near complete reversal in the form of those sales, shifting from low rise to high rise,” said George Carras.
Among the other significant findings in the review, RealNet and BILD revealed that high rise development increased rapidly in the 905 region. Nearly one of every three new homes sold in the 905 area in 2011 were high rise new homes. These results are dramatically different than in 2000, when high rise new homes represented only five per cent of total new home sales.
The RealNet Price Index for high rise new homes illustrates that although the average price per square foot rose by 4 per cent over last year (to $529/s.f.), the average unit price was down 2 per cent from the previous year to $434,322. The high rise index size shrank by 6 per cent in 2011 to 820 s.f., a reduction of 52 s.f. from last year and 100 s.f. from just six years ago.
“It’s ironic to point to lower prices and smaller suites as signs of success, but that’s exactly what the numbers mean,” said BILD Chair and Executive Vice President of Empire Communities, Paul A. Golini. “They reinforce the shift we are seeing in the Greater Toronto Area’s new home market towards increased high rise development, and the commitment of developers to meet this increased demand with quality, affordable housing. To achieve this, the industry’s developers, designers and architects have been forced to seek out greater efficiencies, creating smaller, yet more functionally designed units.”
The RealNet Price Index for low rise new homes increased by 8.4 per cent over the last 12 months to $545,372. The low rise index size was up two per cent over that same period to 2,407 square feet.
Current market dynamics have shrunk new home inventory, resulting in a greatly diminished supply of both high and low rise product. Measured in terms of months, RealNet’s review of the 2011 market showed record low levels of low rise supply (four months) and high rise supply (six and a half months).
“The record low supply numbers demonstrate the strength of the industry to respond to new regulatory requirements,” said BILD’s Acting President, Joe Vaccaro. “But the supply numbers also reinforce the need for our partners in government to streamline regulations, expedite the approvals process and review the fees and charges faced by the GTA’s new home sector. Unnecessary delays, hidden costs and labyrinth-like procedures are barriers to a stable supply of new homes and affordable options for the GTA’s homebuyers.”