The cost of a newly constructed home was up 25 per cent in January over the same month last year and has now surpassed the psychologically significant $1 million mark.
The most coveted new builds, detached houses, averaged $1.3 million in January — nearly three times the cost of a decade ago, as the supply of those houses dwindled to a record 534 from 12,242 10 years ago, according to the Building Industry and Land Development Association (BILD).
There were only 741 low-rise homes sold in the region last month, below the 10-year January average of 970 units, and a 29 per cent drop from the same month last year.
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BILD blames a historically low supply of new homes on the market — 13,053 for sale across all categories last month compared to 31,461 a decade ago — for the soaring prices.
Builders will construct as many new homes as they are allowed this year, said BILD CEO Bryan Tuckey on Thursday. But the influx of about 100,000 people a year to the region means that those homes “will be sold in days, if not hours,” he said.
The industry and the government need to work together to service available land, particularly for water and wastewater, and reduce the red tape that slows construction, said Tuckey.
“In East Gwillimbury, they’re closing sales offices because there’s no service in the ground,” he said, adding that 600 houses were approved in Newmarket but only 223 were built last year.
Tuckey has previously told the Star that he fears the region’s limited housing supply could make the city accessible only to the super-rich or risk driving jobs out to other markets that are more affordable for workers.
The BILD statistics suggest that new home prices are experiencing the same phenomenon reported last week by the Canadian Real Estate Association, which said the shortage of re-sale homes is pushing many buyers farther outside Toronto, encouraging sprawl at a time when governments are trying to contain it.
Where Newmarket, Bradford and Oshawa used to be affordable commuter markets, now buyers are driving from places such as Caledonia, Fergus or Guelph, said Tuckey.
That category, which includes stacked townhomes and mid-rise buildings, as well as high-rise apartments, hit a record average sale price of $507,511 last month, up 13 per cent or $60,000 from January 2016. The number of sales also rose slightly year-over-year to 1,199 from 1,080 last January.
Condos comprise 88 per cent of new homes in the region. That’s up from 42 per cent a decade ago, says BILD. The average region-wide price per square foot is $625.
The price escalation in condos this year is “jaw-dropping,” said realtor Andrew Harrild of Condos.ca, who sells pre-construction and re-sale condos, mostly in downtown Toronto.
Listings are down about 50 per cent from normal, he said. “There’s a lot of buyers and not enough listings, and it’s pushing the price higher and higher,” said Harrild.
It’s increasingly difficult to find value for clients, he said. Harrild said he is brutally honest with buyers, telling them that if they’re not prepared to go in without conditions and with a cheque in hand, they won’t be able to compete.
“There’s no point sugar-coating it,” he said. “We’re in uncharted waters right now. The average condo that was selling for $620 per square foot last year is now selling for $800 per square foot, and we’re seeing the prices increase dramatically across the board.”
He cited a unit at Broadview Lofts in South Riverdale. About nine months ago, it sold for $645,000. Last week, it fetched $825,000. There were 30 offers on a 923-square-foot Portland St. condo last week. Listed for $629,000, or about $700 per square foot, it sold for about $250,000 over the asking price.
Prices are rising so fast in re-sale condos, Harrild said, he thinks pre-construction might be a better investment at this time.
“With all the new buildings that have been finished in the last few years, nobody expected us to be in a situation where there’s still a shortage. People would have assumed there would be enough condos to go around.
“We’re seeing a huge increase in buyers coming from overseas and these buyers are coming with a lot of money,” said Harrild.
He thinks Asian investors are helping drive up the Toronto market thanks to Toronto’s stability and the 15 per cent tax on foreign buyers introduced last year in Vancouver. But Harrild said the majority of overseas buyers he sees are end-users — often students who have a condo financed here by parents living abroad.
“Maybe this is just the new reality,” said Harrild. “Maybe Toronto is the next New York and we’d better get used to it. Maybe this is just where prices are headed. We’re an international city. People look at us and they envy what we have here.”
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