Condo living will be the new normal in Ontario
As per BMO Report
Source of information: bnn.ca
“The already expansive price gap between condos and detached housing in the Greater Toronto Area (GTA) will continue to expand towards the end of the decade as new detached development is squeezed against the walls of the protected Greenbelt and overwhelmed by mature millennials looking for backyards”.
That’s according to a new study from the Bank of Montreal (BMO) examining how changing supply and demand dynamics will shape housing in the GTA.
While currently it may seem that there is a lot of condo inventory in Mississauga, and even more in Toronto, people cannot envision the next 10 years where condo living will be the new norm. Drivers of this shift will be seniors looking to downsize from their homes, new immigrant families, first time buyers, young families. Add to this the simple fact that there are not a whole lot of affordable single home developments on the horizon, be it detached, semis or townhomes.
For example, in 2014, about 57,000 condo units were under construction in Toronto, as opposed to just 7,200 single detached homes. People looking for suburban lifestyles are being gradually left with no choice, but to move to condo living. Another component driving people to condo living is the almost out of reach costs of resale homes, fuelled by bidding wars with many buyers and little inventory.
Is condo living for you – you decide
“A four bedroom house on a 40-foot lot would have been the benchmark new home product in Vaughan Ont. in 2004. It would have been about $575,000. In 2014, the same house is $1.5 million. Almost three times the price,” says George Cares, the president of Real Net Canada Inc.
The astonishing price difference is evident in the whopping $300,000 price gap between a new condo and a home. What happens in Toronto has a ripple effect on the rest of the markets in the GTA. This means that people may even start moving away for the GTA core to Cambridge, Kitchener or Barrie. This is because definitely Vaughan, Markham and Mississauga home prices will be out of reach.
Some people compare Toronto’s housing market with Vancouver. While geography dictates density of housing in Vancouver, it is a slightly different reason for condo density in Toronto.
What is driving condo living density?
The Ontario Places to Grow Act has called for a huge protected area comprising of green space, farmland, wetlands, and watersheds around the Golden Horseshoe area. While land might be available near the periphery, commuting to downtown core which is the major job source, will prove to be a big hindrance in the absence of reliable transit. Hence any or all residential construction in Hamilton, Durham, Halton, Peel and York regions will be limited within the built-up area. The simple rule of supply and demand will push people to condo living.
The Places to Grow Act will be due for a 10-year review in 2016. Its statement for 2041 calls for “compact development that makes the best use of our limited land supply and offers a diversity of choices for living, working and enjoying culture,” as well as a “fast, reliable, and integrated transportation system.”
It is possible that the Places to Grow Act could evolve with the needs of people in the next decade and beyond, for now though the delta between a home and a condo is about $300,000 in Toronto. For perspective, Vancouver, which is like 10-15 years ahead of Toronto in real estate pricing, the price gap is as high as $750,000 to $800,000.
The bottom line about condo living and prices
For now, Toronto condo prices could see a long period of price stagnation or sluggish growth to the end of this decade, with detached home prices likely continuing to outperform.