New construction condo sales in the GTA surged in September, according to the latest Altus Group data released by the Building Industry and Land Development Association (BILD) today.
There were 2,101 new homes sold in September, 83 per cent of which were condos, while low-rise single-family homes made up only 17 per cent of total sales.
Condo sales were in line with the 10-year average of 1,180, while low-rise sales fell well below their average of 1,173.
The supply of single-detached properties in the GTA has been falling for years. Ten years ago, in February 2007, 12,064 new detached homes were on the market.
Many developers say that Ontario’s growth policies have led to a lack of serviceable land for the construction of low-rise homes in the region, leading to a shift in development towards high-rise buildings.
“The GTA home market is being driven by multi-family homes,” writes BILD president and CEO Bryan Tuckey, in a statement. “Year-to-date, there have only been 6,178 new single-family low-rise homes sold, which is a level we have not seen in more than a decade.”
When it comes to the growing demand for condos, Ben Myers, senior VP of market research and analytics at Fortress Real Developments, points to affordability issues for buyers in the GTA.
“When you look at the recent mortgage rules that were put in place earlier this month, a lot of people are not going to be able to afford that single detached home they really want, so they’re going to have to go to the condo market,” Myers said during his latest appearance on Facebook Hive, BuzzBuzzHome’s weekly Facebook Live broadcast.
Last week, the Office of the Superintendent of Financial Institutions (OSFI) announced a new mortgage stress test, which will require all uninsured mortgage borrowers to qualify against the Bank of Canada’s five-year benchmark rate, or at their contract mortgage rate plus an additional 2 per cent.
The new rules are meant to ensure that uninsured borrowers can withstand higher interest rates. The overnight rate — which influences mortgages and sat at a historically low 0.5 per cent earlier this year — has been raised 50 basis points by the Bank of Canada since July, with a third hike predicted for later this year.
According to Myers, the new rules will significantly cut into the ability of GTA homebuyers to afford single family detached homes.
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“It forces some people to only look at condos, so that boosted demand [in that sector],” he said. “There’s going to be lower demand for those higher priced homes, because there will be less credit for those mortgages.”
But buyers worried about affordability issues won’t find comfort in September’s housing price numbers. The average price of a new multi-family home rose from $644,327 in August to $661,188 in September, while the new average price of a single-family home fell from $1,289,298 to $1,204,829.
The average condo price per square foot was up 25 per cent from this time last year, to $789, and the average unit size was down 4 per cent year-over-year to 838 square feet.