In this installment of our 2016 GTA Market Report series, we will examine how affordability is increasingly becoming an important force in shaping GTA markets. With the lack of low-rise housing supply in the market, coupled with a growing population driving housing demand, homeowners are increasingly faced with deteriorating affordability. The average price of a detached home in the City of Toronto is currently $1.2 million, which is pricing many buyers looking for this product type out of the market.
Increasingly, rising home prices are forcing many homebuyers to decide between two distinct lifestyles in the GTA – urban versus suburban. Many families are forced to evaluate the trade-offs between living a more compact urban lifestyle in a condo or moving to peripheral suburban markets for access to larger houses in comparatively more affordable regions. The search for affordable low-rise options has given way to a new phenomenon, known as “drive until you buy,” where buyers will continue to drive away from the City until they find a house at a price point they can afford.
Image: the price gap between low-rise and high-rise options continues to widen. Source: Altus Group Presentation, March 2016
While new home prices continue to increase in suburban GTA low-rise markets, the average price of a new condo unit has remained relatively flat. In reality though, as the size of the average condo has decreased by 30-50% due to improved layout efficiencies, the price per square foot for new condos has increased at a historically rapid rate. This may lead to some buyers spending more for less “house” regardless of whether they purchase a low-rise or high-rise property within the City.
The existing supply and demand imbalance is making affordability a leading challenge for families in the GTA. The upward pressure on pricing, especially in low-rise supply, has created a growing price gap that is forcing many homebuyers to face the dilemma to either move up or move out.
To learn more about the 2016 GTA Market Report, please contact your Greybrook Investment Representative.