Single-detached homes in dramatic decline in GTA, says CMHC
May 25, 2015
By Susan Pigg
The single-detached home is increasingly marching to extinction, unless you can afford $2 million in the core of the GTA or are willing to drive to the last remaining bastions of affordable low-rise housing - the easterly 905 regions, Hamilton, Barrie and Kitchener-Waterloo.
The condo will remain king across the GTA and drive total housing starts up 12 per cent this year alone, according to a spring outlook report from the Canada Mortgage and Housing Corporation.
“The ensuing result will be less single-detached home starts in 2015 and beyond,” notes the federal housing agency in a report that paints a rather worrisome picture of the future for families looking for more than a condo with a baby den.
“Townhouses will become the equivalent of the new single-detached home in the GTA,” says the annual outlook report, released Monday.
Pre-construction sales of townhouses have been trending upward - as have sales and prices of resale townhouses across the GTA. But just 5,050 new townhomes are expected to begin construction in 2015 across the GTA, according to CMHC, compared to 18,500 high-rise starts this year. That number is expected to climb to 20,300 condo unit starts in 2016.
The construction of new, single-detached homes continue their dramatic decline, which started in 2010, with just 7,700 starts this year, and just 7,000 in 2016. That’s largely because of soaring land costs, lack of lots serviced with roads, sewers and other necessary infrastructure and “land use policies.”
While the CMHC report doesn’t elaborate, home developers have repeatedly blamed the province’s Places to Grow intensification policies for driving construction of new, detached homes into virtual extinction. Since the intensification policy was introduced in 2006, there has been a dramatic shift to high-rise condo construction across the GTA, and a dramatic decline in house construction, even as the growing numbers of echo boomers move toward their child-rearing years.
Last week the Building and Land Development association, which represents both high-rise and low-rise home builders across the GTA, warned that simple supply and demand economics are having a dramatic impact on homes price.
Over the last year, the average price of a new construction low-rise home (detached, semis and townhouses) has increased 16 per cent, to $775,416. High-rise condos rose a more modest 3 per cent, but are edging close to half a million dollars at $448,760.
“In spite of tight resale market conditions for low-rise homes in the GTA, fewer sales of new single-detached homes are expected in the future and therefore fewer starts,” CMHC says.
That’s forcing more families to - in the words of developers - “drive until they qualify” for mortgages in more affordable municipalities outside the pricey GTA, such as Hamilton, Barrie and Kitchener-Waterloo, which are seeing tremendous growth.
Price growth for new, single-detached homes has outstripped all other housing types “and will continue to show higher gains in 2015 and beyond,” says CMHC.
It anticipates 5.5 per cent price growth this year, to $881,500 for a detached home. Prices remain more affordable in Brampton and Milton, says the federal housing agency, but higher in Vaughan and Markham.
Expect to pay more than $2 million for a detached in-fill house in popular City of Toronto neighbourhoods, the report notes.
With mortgage rates expected to stay low for some time, the resale market is also expected to see continued strength this year - it expects a record 93,400 resale homes to change hands this year - but some slowdown in 2016 “as modest economic growth and affordability concerns dampen home buying activity.”
The average price of an existing home is expected to climb 5 per cent in 2015 and 1.7 per cent in 2016, bringing the average GTA house price - which includes both low- and high-rise housing - to $595,000 and $605,000 respectively.
Expect demand for housing to be especially fierce in the Oshawa Census Metropolitan Area as families go in search of a backyard they can afford.
That could see the average existing home price - which is about half that in Oshawa to the City of Toronto - climb by 8.1 per cent this year and 4.8 per cent next year, says the report. That would bring the average price to $420,000 in 2015 and $440,000 in 2016.
Rental demand is also expected to remain strong across the GTA, says CMHC, but the vacancy rate could push closer to 2 per cent as a record number of condo completions expected this year come on stream.
All of this demand is being driven by a number of factors, says the survey: a slight improvement in net migration, as the Alberta economy and jobs slump in the wake of oil prices, an anticipated 1.7 per cent growth in employment in the Toronto area this year, continued low mortgage rates and a slight pickup in wages.