Tight supply drives up new house prices and condo values in February: Report

Fewer than 20 per cent of new single-family homes priced under $750,000

There is little relief so far this year for first-time buyers in the Toronto region looking to purchase a new construction home.

The overall limited supply of newly built and pre-construction homes is particularly severe in the single-family category — detached, semi-detached and townhouses — priced for first-time buyers, according to the home building industry.

That shortage is continuing to send first-time buyers into the condo market where the benchmark price of a condo rose 39.5 per cent year over year in February, compared to a 12.8 per cent price rise for single-family homes.

The ongoing supply squeeze helped drive up single-family home prices to $1.22 million on average year over year last month, said David Wilkes, president and CEO of the Building and Land Development Association (BILD) in a press release Thursday.

Condo apartments and stacked townhouses, which had an average selling price of $729,735 in February, continue to dominate the new housing market, accounting for nearly 1,900 of the 2,159 new homes sold, said BILD.

The number of new home sales continues to be low. The number of single-family homes that sold in February — 264 — was down 82 per cent year-over-year, 79 per cent below the 10-year average.

Condo sales also dropped 50 per cent compared to February 2017, but remained 17 per cent above the 10-year average number of sales.

Of the 12,896 new homes on the market at the end of February, 9,285 were condos. But supply for all types of homes is below what the industry considers a healthy level. There are about four months’ worth of inventory on the market, says BILD. Ideally there should be about nine to 12 months’.

Although there are more single-family homes on the market compared to last year, historically, the inventory is still low, said Patricia Arsenault, executive vice-president of Altus Group, which compiles the building industry statistics.

“There is a dearth of new single-family product that is affordable to a broader range of buyers,” she said. “Fewer than one in five single-family homes available to purchase at the end of February were priced below $750,000.”

The high price of traditional low-rise houses is a key driver in the more moderately priced condo sector on both the new construction and re-sale home sectors.

Condos cost $814 per sq. ft. on average in Feburary, compared to $652 per sq. ft. a year ago and $802 per sq. ft. in January. The average size of a condo was 896 sq. ft.

BILD, which blames regulation for limiting the supply of new homes on the market, wants the issue on the upcoming provincial and civic election agendas.

“We encounter excessive red tape, out-of-date zoning, and lack of developable land service with critical infrastructure,” said Wilkes.

The most single-family homes sold in the Toronto area last month were in Halton, which accounted for 117 of the total 264 sales. There were only three in the City of Toronto.

Toronto remains the king of condos with 973 of the 1,895 sales, while York Region had 748 condo sales.

By TESS KALINOWSKIReal Estate Reporter
Thu., March 22, 2018