I was reviewing the recent new home market figures released by Altus Group and the Building Industry and Land Development Association, and I believe the Greater Toronto Area is almost on the right track.
In April 2019, there were 3,853 new home sales in the GTA. That’s 123% higher than the same month last year. The mortgage stress test kicked in at the beginning of last year and it sidelined a lot of buyers, so we didn’t experience the active spring season we usually have.
Only 800 of the sales were of new single-family homes, and the rest were condos. For single-family homes, 800 sales is 50% below the 10-year average. With more than 3,000 condo sales, activity was 37% higher than the 10-year average.
Some people may look at the amount of single-family home sales and think 50% lower than the long-term average is too low, but to me it’s just right. If the GTA is going to continue to grow and accommodate the increasing population, than more high density housing is necessary. That means more people need to be buying condo units. If more people are buying condo units, it results in fewer single-family home sales.
Of course, the single-family home market is still super important and valued. Just last weekend Fieldgate and Paradise sold out at Park Vista in Whitby. Both builders offered a collection of luxury semi-detached homes from the mid $500,000s. They sold out in a day.
The ideal GTA housing scenario for me is more couples and small families embracing high density living (specifically near major transit nodes), and still having a healthy supply of single-family homes for larger families.
Supply is actually looking pretty good to me, too. As of the end of April, there were 13,707 new condo units available across the GTA. If you want to buy a new single-family home, you can choose from 4,580 lots.
Even price growth is taking a breather. The average price of a new single-family home in the GTA increased 0.3% to just over $1.1 million last month, while the average price for a new condo unit jumped 2.5% to nearly $760,000.
April was basically an amazing month for the GTA’s new home market. But it’s important to remember that it’s only one month. We need consistent quarters of healthy price growth, strong supply, and high sales activity in order to determine if a market is in a healthy state and on the right track.
With the market looking good, some people may be wondering why making it easier for builders to create more supply is a priority for the province (Bill 108 - Housing Supply Action Plan). And if more people are buying and confidence in the market is rebounding, maybe the stress test doesn’t need to be revisited either?
What I will say is that I believe public discussion, media headlines, and industry announcements impact the market, even if no changes have been officially made. There’s been a mixture of positive and negative headlines (as usual), but I feel like we’re trending more towards the positive.
People see that there’s action being taken to improve housing affordability, and it’s building confidence in the market.