The Altus Group released its latest housing report last month with a focus on how new townhomes are playing a role in Canada’s new home market.
In the Greater Toronto Area, new townhome sales have dropped dramatically over the last two years. In the first half of 2016, there were 5,329 new townhome sales. Last year, there were 2,522 new townhome sales during the same time period. This year, there were only 885 new townhome sales from January to June.
While new townhome sales have fallen, their role in the new home market is on the rise, says Altus Group. Back in the 1950s, new townhomes only accounted for 1% of starts. This amount has increased partially because the price of a detached home skyrocketed, making townhomes the more affordable option.
The thing that’s currently keeping new townhome sales from booming is the fact that new condos are the most affordable due to their lower average size. Young, single buyers, like millennials, are more drawn to a one-bedroom condo because it is the most affordable entryway into the market.
Altus Group believes new townhomes will be high in demand very soon because baby boomers will be downsizing from their detached homes and millennials will be looking for move-up options.
This may not be the case though. Mattamy just opened a new condo in Toronto with two-bedroom condo suites starting from the $500,000s. This is an amazing option for couples looking to start a family but want to continue living in a condo. If more builders follow suit, we could be seeing more more family-size condo units on the market, pulling buyers away from townhomes.
And earlier this year, a Royal LePage report found that baby boomers are about to flood the condo market, creating more competition for millennials. While townhomes may be the ideal option for those who absolutely require a low-rise lifestyle, it seems like condos will remain the low maintenance, most affordable housing option in the GTA.
Then we have stacked townhomes, which are frequently/typically condo units, but people don’t think of them as condo units because they are usually only two or three storeys and still kind of resemble row housing, depending on the design. (Remember, a condo is a type of ownership, not style of building)
This sounds ideal right? It’s the condo life in a low-rise setting. Then why aren’t people buying them? The Altus Group report says only about 20% of new townhome sales in the GTA are stacked towns. It could be because builders aren’t developing that many. Compared to row houses, stacked towns take longer to go through the planning process and construction takes longer, too.
So, new townhomes may play an important role in the new home market, but condos are still king when it comes to first home purchases, and they may soon be more competition in the move-up sector.