Photo: James Bombales
In early 2017, sales of new single-detached, semi-detached, and townhouses across the Greater Golden Horseshoe were booming. Inventory fell to a record low, and the Altus Group reported that average prices had risen by more than 40 per cent year-over-year. Homeowners recognized that the value of their property had skyrocketed, and many decided it was time to upgrade to a new home. Domestic and foreign investors added to bubble-like market conditions, and the spike in housing values in the GTA and surrounding municipalities.
Then came the Fair Housing Plan announcement in April 2017, which acted as a brick wall, immediately stopping the low-rise new home frenzy, and sales slumped in the second half of the year. “Single-family home sales, with 311 detached, linked and semi-detached houses and townhouses sold…[were] down 77 per cent from last March and down 79 per cent from the 10-year average,” reads a BILD press release from March 2018.
As a result of declining sales, some developers have chosen to lower their prices by 20 per cent or more. However, since supply is still low, many developers will instead choose to offer other non-cash incentives, and wait for the market to return before lowering prices. The problem arises when new sites are launched at lower values than existing inventory, putting pressure on the older sites to adjust their prices downward.
I wanted to compare 2018 values to 2017 in various suburban and exurban communities, to see if this potential situation had come up. I used BuzzBuzzHome data on new prices they’ve added to their site this year, and compared it to average data from December 2017 to observe price changes by municipality. Keep in mind that locations, lot sizes, and interior finishes of new home communities can widely differ within a city, and some of the price changes may reflect the fact that the comparison is not apples-to-apples.
The average asking price for a new single-detached home at the end of 2017 in Pickering was $1.3 million. Updated 2018 pricing shows singles at just above $1 million on average, a decline of 21 per cent. Conversely, in Innisfil, the average asking price for new single-detached housing in 2018 is 30 per cent higher than last year.
For the townhouse market, we’ve seen more dramatic declines, with pricing updates in 2018 showing townhouses at $780,000 in Richmond Hill, compared to $1.1 million in December 2017, a 30 per cent drop.
In Vaughan, townhouses in 2018 are being offered at a slightly higher average value than 2017: $885,000 versus $860,000.
There are likely a few developers in Richmond Hill, Mississauga and Pickering that are a little nervous about their new home asking prices, but after four consecutive months of increases in average resale house prices in the GTA, it may be only a matter of time before existing homeowners get that trade-up itch again, and jump back into the single-family new home market in the southwestern Ontario.
Ben Myers is President of Bullpen Research & Consulting, a boutique development advisory firm that produces housing demand, land valuation, and pricing recommendations studies for real estate owners, developers, and lenders. Ben keeps clients up to date on current macroeconomic and site-specific housing market conditions that can impact their active or proposed new home projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at www.BullpenConsulting.ca.