Developers shifting sights to two-bedroom condos
More of units now up for sale are aimed at young families who can't afford houses, report says

TheStar.com
Oct. 22, 2014
Susan Pigg

Developers appear to finally be getting the message that not everyone wants to live in a tiny shoebox in the sky.

The number of shrinking, one-bedroom condos coming on the market has declined dramatically just over the last few months, in favour of more two-bedroom units averaging more than 800 square feet and better suited to first-time buyers and young families, says new-home research firm RealNet Canada Inc.

The bad news, however, is that new, low-rise houses continue to climb out of sight and have hit a new price record of close to $700,000.

The growth of more family-friendly, condo-style projects as alternatives to pricey low-rise houses should further increase next year. That’s when the Ontario government is expected to approve changes to the building code to allow construction of six-storey, wood-frame construction housing in this province for the first time, said RealNet president George Carras in an interview.

Overall, new home sales continue to rebound from the downturn in 2012 and 2013. The number of new condos and low-rise houses sold in the first three quarters of this year climbed 54 per cent over the same period last year, to a total of $18 billion, according to RealNet figures.

Sales of pre-construction condos surged 39 per cent in September alone, year over year, with 2,262 units sold compared to 1,393 a year ago. That’s the second-strongest September on record for highrise sales, the numbers show.

The average price of a new condo in the GTA — supposedly the most affordable form of new home ownership left in Toronto’s still-hot real estate market — stood at $450,014 as of the end of September, says RealNet.

But the gap between the cost of new condos and new low-rise houses continues to climb. The average price of a new house hit a record $689,611 to the end of September.

The staggering costs of new detached homes, even in what used to be more affordable outlying regions of the GTA, has been driving more families to townhomes, rowhouses and semi-detached homes.

But land prices are now setting new records for that sector, warned Carras, at $2 million per acre as of the third quarter of 2014. Those increased costs to developers are going to have “some very significant impact” for homebuyers down the road as those costs inevitably get passed on in the sticker price of attached homes, Carras noted.

Unrelenting increases in the price of ground-oriented housing is expected to push even more buyers to the condo market, and leave millennials with little choice than to raise their families in highrise condo towers.

Developers are finally starting to respond to that trend, after years of shrinking condos that are now, on average, a bedroom smaller than they were even five or six years ago.

Less than half the condos being offered up in developer sales centre this year — some 46 per cent — are one bedrooms, compared to 61 per cent at the peak of sales in 2011, according to RealNet’s research.

The number of two-bedrooms for sale has climbed to 41 per cent of total units up for sale this year, an increase from 31 per cent during 2011.

The number of three-bedroom units for sale this year has also increased, although they still make up a minuscule percentage of the new condo sales market.