Affordability spurring condo construction in Toronto
By Newinhomes on Apr 11, 2018
The Canada Mortgage and Housing Corporation (CMHC) released its housing starts report for March 2018, announcing that construction pace remained steady through the month.
Last month, housing starts trended at 226,842 units, nearly unchanged from the 225,804 in February 2018. The trend is a six month moving average of seasonally adjusted annual rates (SAAR).
“In March, the national trend in housing starts was stable for the fifth consecutive month, as diverging trends for multi-unit and single-detached dwellings continue to offset each other,” says Bob Dugan, CMHC’s chief economist. “Over this period, multi-unit starts have trended higher in most major urban centres while single-detached starts have trended lower.”
In Toronto, housing starts hit a seven month high mostly due to condo unit starts. Though the average price of a preconstruction condo is well above $700,000, these options are relatively more affordable than the low-rise options.
CMHC also points out that tighter borrowing conditions are lowering buyers’ budgets, which causes more demand in the new condo market.
In the St. Catharines-Niagara area, there were 165 housing starts in March 2018, which is the highest number of starts for the month since 1992! Weaker employment and rising prices are strengthening the demand for high-density, more affordable condo units. Last month, 73% of the starts were condo units; in March 2017, new condos only accounted for 41% of the starts.
Brantford also saw a jump in housing starts, but not because of a demand for new condos. Rolling off a high January and February, Brantford’s single-detached starts trended upwards again making for the strongest first quarter in 10 years.
Single-detached construction is ramping up in Brantford partially because more and more buyers in the Greater Toronto Area (GTA) and Hamilton are turning to areas like Brantford for more affordable low-rise options.
The standalone monthly SAAR came in at 225,213 units. The SAAR of urban starts dropped 2.8% to 208,237 units, with urban multiples decreasing 7.3% to 144,578 and single urban starts increasing 9.5% to 63,659. Rural starts are estimated at 16,976 units.
Clearly and unsurprisingly, affordability is having a strong impact on what types of homes are being built and where. New condo prices are hitting record highs, so it will be interesting to see if new condo sales remain steady through the spring.
The average price for a new condo in the GTA in March 2017 was $532,792, and sales were high. By the end of 2017, new condo sales hit a record high, so we expect to see condo construction steady throughout the year and even well through 2019.
