The quest for affordable housing in Toronto and the Greater Toronto Area is ongoing. In December 2010, the benchmark price for low-rise homes in the GTA was $536,537, and of condos, $428,800. The latest statistics from Altus Group show that in January 2021, the benchmark price for new single-family homes reached $1,362,952 – up 24.2 per cent over the previous 12 months. The benchmark price of new condominiums was $1,021,017 – up 10.4 per cent over the previous 12 months. Who would have thought we’d ever see these benchmarks in our lifetime?
So, what gives? It’s all about the rule of supply and demand. A Ryerson University study showed that in 2018, Toronto experienced some of the highest net population growth in North America, with 77,000 people settling in the city, and a total of 125,000 in the GTA. Yet, the new home industry built just 35,000 homes across Toronto and the GTA. Then consider locations. Developable land in the City of Toronto is scarce, so we have seen an explosion of condominiums in the 905 areas. According to Dave Wikes, BILD President and CEO, for a new home market to be healthy, we need nine to 12 months of inventory, but we currently have only about four months’ worth.
In short, our population is increasing faster than new homes are being built, and prices continue to rise. If you’re thinking, well, then build more homes – it’s not quite that easy. The government requires an unprecedented amount of red tape, paperwork and development charges that add somewhere in the vicinity of tens of thousands of dollars to the cost of a home. Of course, it’s purchasers who pay the price for this. Add to that the dwindling supply of lumber in Canada, and rising prices are inevitable. Delays because of the lumber shortage add costs to building. Other materials shortages are taking their toll as well.
What’s the answer? Governments need to take more dramatic steps to streamline the approvals process for residential building, as well as normalize supply chains that have been bogged down from the pandemic, which is still wrecking havoc with our economy. The introduction of the vaccine will help, of course, but it will take time. Depending on how things play out, Canada may see 1.2 million permanent residents added to our population between now and 2024, and many will settle in Toronto and the GTA.
The good news is that mortgage interest rates are still incredibly low. Now is a great time to get into real estate as an investment, whether it is for your financial portfolio or to live in. Don’t you wish you’d have bought a new condo in 2010?