Highlights of Hot Low-Rise Housing Market in Southern Ontario

Altus Group Presents Highlights of Hot Low-Rise Housing Market in Southern Ontario

Peter Norman of the Altus Group gave an exceptionally virtual informative analysis of the residential housing market in Southern Ontario to BILD members April 27, 2021.  Everyone knows that it is a hot market but here are some highlights:

1. Inventory

   Inventory is at its lowest level in 10 or 20 years at fewer than 2,000 new homes for sale in GTA.  This represents less than 1 month’s supply.

2. Average single family price in GTA is up from $1.15M in February 2020 to $1.45M a year later.This kind of increase is not sustainable and is somewhat scary.
3. Number of New Projects

   There were approximately 37 projects launched in 2021 Q1 producing around 1,300 units.  This represents a fraction of 1 month’s supply.

4. Land Sales

   The number of land sales in Q1 2020 vs. Q1 2021 rose dramatically from 105 sales to 155 sales.  The total amount of revenue generated rose from $1.132B to $1.98B for the same period.

5. Resale Prices

   As everyone knows, resale prices have escalated dramatically in 1 year.  Although Toronto (416) rose 16.5%, price increases in smaller communities like Barrie, Cambridge, Kitchener, North Bay, etc., were 36% - 44%. 

6. Immigration Levels

   Immigration was dramatically down in GTA from over 131,000 a year ago to only 66,000.  The numbers are increasing however.  This should have been reflected in a softening in the housing market because of the lower demands but because of a number of factors which he outlined, the opposite happened.  However, the expectation is that immigration will return within a year to the normal 155,000-200,000 in the GTA and the large number of the immigrants are in that sweet spot of 30-40 years who are people looking to buy homes.  As well, a large number of the immigrants represent families who are also looking for homes. 

7. So why was there huge upswing is demand in prices?
   1. aging GenX population now looking for homes;
   2. the pandemic stay-at-home philosophy encouraged people to look for cheaper housing outside of GTA, particularly those in small units in Toronto;
   3. interest rates made the cost of housing substantially cheaper.
8. Forecast for the Near to Mid-Term
   1. Immigration will come back and the continued demands of the GenX population will further housing demand;
   2. Interest rates will move up but slower than originally anticipated, given the Bank of Canada’s pronouncements last week.This may put a small damper on the market but not much;
   3. Construction and development costs continue to escalate.These numbers may dampen demand, just given the affordability factor.
9. My Own Predictions

The current market, particularly in the low-rise market, is not sustainable.  It never has been in the past.  You only need to look at the 1975/1976 market, the 1980/1981 market, the 1988/1990 market and the 2016/2017 market.  It won’t take much to put a pin in the bubble.  As much as people are rushing to buy now because they think prices will go up, there will be circumstances that will change people’s minds.  I don’t know what they will be, but interest rates, government policies and potentially, an extended COVID-19 lockdown may impact.  But for the moment, builders should get their product out there and get it sold while the timing is good.

Regarding the condominium market, Toronto will come back, people return downtown and work downtown, and the demand will continue.  The challenge will be the affordability factor for investors and owners because of the escalating costs and prices. 

Stay tuned.