New house prices soared 16 per cent in GTA in 2012: Report
A record 16 per cent spike in the cost of new single-family homes across the GTA has developers concerned for the future, but that’s the price to be paid for living in traditional subdivisions that are no longer sustainable, greenbelt advocates say.
Provincial policies aimed at curbing urban sprawl played out in a big way in 2012, as the index price of a newly constructed single-family home spiked to an unprecedented $632,868, says a report released Wednesday by real estate research firm RealNet Canada Inc. on behalf of GTA developers.
At the same time, sales of newly constructed detached houses, semis, row and townhouses dropped about 20 per cent, to their second-lowest levels since 2000, it said.
“Land constraints, regulatory requirements and a complex approval process fraught with delays are seriously challenging the vitality of the low-rise sector, as well as housing choice for the new home buyer,” says Steve Deveaux, first vice-chair of theBuilding Industry and Land Development Association and an executive with Tribute Communities.
While upsetting for househunters, escalating single-family home prices are just one of the “bumps along the way” that could encourage people into higher-density housing types that are more sustainable, says McGill University adjunct professor Ray Tomalty, a principal of Smart Cities Research Services.
“It’s kind of like ‘polluter pay.’ If you choose to live on the periphery on a large lot in a large home where you have to commute by car, you should have to pay,” says Tomalty.
But just look to Vancouver which is “about 15 years ahead of us,” says RealNet president George Carras, pointing to the priciest, although softening, housing market in Canada, which he says has been similarly impacted by land shortages.
Those shortages have helped push the gap between high-demand houses and condos to about $700,000, he says.
That price gap hit a record $196,844 in the GTA in 2012, more than double the historic average of almost $87,000 as condo prices softened — they averaged $436,024 as of Dec. 31 — and house prices soared, the RealNet report notes.
Even resale house prices are being pushed up because developers can’t access enough develop-ready land to keep up with the demand for new single-family homes from families and other househunters who don’t want to live in condos, says Carras.
“A central tenet of the growth plan and provincial land use policy is to encourage a greater mix of uses and housing types to make more efficient use of infrastructure, to promote housing affordability and to provide choice for people at different stages of their life,” says Kirby Dier, spokesperson for the ministries of energy and infrastructure.
“There is nothing to indicate that provincial land use policies are causing house prices to increase,” she noted, citing a variety of influences, from land to financing and construction costs.
Even municipalities with no greenbelts have seen significant house price increases since 2005, says Burkhard Mausberg, CEO of the non-profit group Friends of the Greenbelt Foundation, citing increases of 75 per cent in Winnipeg and 54 per cent in Calgary.
And GTA still has more than 58,000 hectares of so-called “whitebelt land” between the existing GTA and the greenbelt, enough for decades of development, he stresses. (Developers are concerned those lands remain in “policy purgatory” with no clear direction from Queen’s Park what can be built and where.)
The RealNet report paints an interesting picture of what’s become, largely since the province introduced its growth plan and greenbelt policies in 2005, what Carras calls a “tale of two housing markets” — dwindling single family homes and record condo construction:
- the highrise boom went bust in 2012, with condo sales down almost 35 per cent over 2011 as demand softened;
The low-rise sector — new detached, semis, row and townhouses — saw a 19.8 per cent decline in sales because of land and approval challenges getting new single-family home projects launched;
- New house prices have climbed 44 per cent just over the last four years as supply has decreased by 52 per cent;
- New condos averaged 804 square feet in 2012 ($542 per square foot across the GTA), just 16 square feet smaller than 2011, as developers realized that size matters;
- A record 60,713 units in 237 condo projects were under construction across the GTA in 2012. Some 88 per cent of those units were sold before construction even started.