Strong demand for new homes in the GTA has resulted in the third-highest sales year in the past decade, according to numbers just released from the Building Industry and Land Development Association (BILD).
As for 2016, well, expect more of the same.
In 2015, there were 41,295 new homes purchased in the GTA according to RealNet Canada Inc., BILD's official source for new-home market intelligence; a 2 per cent increase from 2014 when 40,324 new homes were purchased.
Bryan Tuckey, President & CEO of the Building Industry and Land Development Association (BILD) expects the strong demand to continue, which he says is attributable to the roughly 100,000 annual newcomers the region forecasts until 2041.
With roughly 40,000 new units being built every year to accommodate the growth, expect demand to remain high.
Meanwhile the average price of a new low-rise home reached $829,766 in December 2015, an all-time high and an 18 per cent increase from a year ago when the average price was $705,813.
Of concern though is the gap between average low-rise ($829,766) and high-rise ($453,083) now at an all-time record ($376,683).
"The escalated price is a function of supply and demand. There is not enough supply in low-rise product, (but) the high-rise market is somewhat stabilized," said Tuckey. "Units are getting smaller; price is stable. There's enough supply to meet demand in that market."
"The gap between is important because that measures how hard it is for someone to go from high-rise to something low-rise as family situations change. They take on almost $377,000 in extra cost," said Tuckey.
In Toronto and area, condos now account for 52 per cent of sales. "If you were to go back 10 years or so, almost 70 per cent of all GTA homes were ground-related homes, and about 25 per cent were high-rise homes. This year it's pretty close to 50/50," says Tuckey.
Tuckey is advocating for more low-rise development closer to Toronto. A major reason low-rise is so expensive is — in addition to demand outpacing supply in the immediate GTA — that fringe regions aren't adequately serviced with roads, sewage and wastewater.
"People go as far as Keswick, Kitchener and Guelph," he said. "The big challenge for young people today is to have a ground-related home if they have a couple of kids and a dog."
According to Urbanation, the high-rise market experienced a strong fourth-quarter of sales due to a combination of new project launches and others nearing completion, making tentative occupancy a shorter wait.
"It does speak to the fact we're seeing more activity with end-user (as opposed to investors) buyers," said Shaun Hildebrand, Senior Vice President of Urbanation. "End-users typically buy later in the development process when they can see when the move-in date will be, and buy when completion is within the next 12 months. Activity in that stage increased a lot last year and I think it's because most buyers are priced out of the single-family home market."
Hildebrand suspects also the low Canadian dollar is attracting more foreign investors.
"For foreign buyers, the local market has effectively gone on sale with the depreciation of our dollar, so in U.S. dollars the average condo prices right now are back to where they were in 2010," said Hildebrand, adding industry insiders estimate foreign investors comprise 10 to 15 per cent of buyers.
Interestingly, single-family home prices are increasing faster in the 905 than in the 416 because, Hildebrand believes, prices initially grew too high in Toronto.
"They got so expensive in the city that people went out to the suburbs, and they've quickly escalated prices there. That makes condos more attractive and affordable in those areas," he said.
"I'd also say the 905 is becoming more popular among investors as well because rental markets there are incredibly strong right now. Rent prices are increasing faster than in the city."
Peter Norman, Vice President & Chief Economist at Altus Group, says there are supposed to be 20-25,000 new single-family homes on the market annually, but some years saw only 10-12,000.
"That leaves 8,000 (or more) homebuyers still out there in the market trying to get into the single-family sector," he said.
However, he believes the low-rise market will rebound in 2016 with more inventory.
"Land sales is more of a leading indicator," said Norman.
"Even with a lot of supply constraints, we see the industry starting to bring forward more projects and more supply. All of that together is a cocktail for growth."