In the GTA, 2015 was a year of strong sales for new homes and condominiums and a year of record-breaking prices.
Demand for new homes in the GTA remained strong because the region continues to grow by up to 100,000 people each year.
One of the highest volume sales year in the last decade, last year saw 41,295 new homes purchased. Sales were up slightly from 2014 and up 13 per cent from the 10-year average of 36,543.
The split between high-rise and low-rise purchases was fairly even. Accounting for 52 percent of the new homes sold, high-rise condos just edged out sales of low-rise townhomes and detached and semi-detached houses.
Prices of new homes in the GTA reached new heights in 2015. New-home buyers looking for detached homes can now expect to pay close to one million dollars. The average price of the much coveted homes reached $991,156 in December, up 18 per cent from a year ago.
Overall, low-rise home prices increased by more than $100,000 in the past 12 months. The average price across all types of low-rise homes reached $829,766, a new all-time high.
For many new-home buyers, especially first time buyers, high-rise condominiums are becoming the only housing option that is affordable.
The home building and development industry continues to innovate and find ways to keep condominium prices within the reach of first-time buyers. In the face of escalating land prices and other costs including government fees and changes, they are doing this by maximizing living space and reducing the overall size of suites.
So while the average price per square foot of new high-rise homes hit an all-time high of $584 in December, the average price of a suite actually decreased slightly. In December the average price of a new high-rise condo unit was $453,083, down from $454,476 a year ago. At the same time, the average suite size decreased from 816 square feet to 775 square feet.
Escalating prices is a function of supply and demand. While demand for low-rise has remained strong, the GTA faces a constrained supply of new low-rise homes coming to market due to a lack of serviced developable land. This significantly affects housing choice for new-home buyers and has made purchasing low-rise homes increasingly challenging.
Some experts believe that the GTA is following in the footsteps of Greater Vancouver. A recent study by the research firm Demographia identified Vancouver as the third-most unaffordable city in the world. The study attributes the erosion of housing affordability in Vancouver to constraints of construction and says the same constraints are at play in the GTA.
The research found constrained supply of serviced land designated for development has reduced the supply of new low-rise homes across Vancouver while demand has not disappeared. Therefore demand for ground related has outpaced supply and prices have surged. Sounds familiar, doesn’t it?