In a sign of things to come as Toronto’s spring housing market heats up, the gap between the price of a new house and a new condo skyrocketed to nearly $300,000 in February.
It was a fresh record for a market where intense competition has pushed the average price of a detached house over $1-million, while a flood of newly built condos, many of them aimed at investors, has kept prices flat.
The average price of a new house in the Greater Toronto Area hit $733,578 in February, up 12 per cent from a year earlier, data from real estate research firm RealNet Canada Inc. and the Building Industry and Land Development Association show. That figure includes the price of all low-rise housing: detached, semi-detached and townhouses.
The average price of a new condo, meanwhile, has gained less than 1 per cent over the past year, rising to $442,672 in February. New condo prices have actually fallen slightly in the past two months.
The growing disconnect between single-family and high-rise homes has pushed the price gap up nearly $40,000 since December.
Given that the numbers capture only newly built housing, the widening price gulf reflects the fact that the soaring cost of land in the Toronto area has shifted new single-family development toward higher-end homes, while pressure from investors to keep condo prices low has encouraged developers to shrink the size of units.
(The average unit size of newly built condos has fallen from 925 square feet a decade ago to 801 square feet today.)
But the divide also mirrors what is happening in the resale market, where the price gap between condos and houses hit nearly $250,000 in the first two weeks of March, Toronto Real Estate Association numbers showed. Resale house prices jumped 11 per cent this month compared with a year ago, while condo prices remained flat.
The widening gulf between condo and house prices was to be expected given that 2014 was a particularly strong year for new condo construction in Toronto. There were roughly 18,000 condo units built in Toronto last year, according to data from BuzzBuzzHome, a site that tracks new housing development, compared with about 1,200 single-family homes.
However, the numbers also reflect the shifting preferences of buyers in the region, who have becoming increasingly willing to bid up prices on the dwindling supply of single-family homes even as a glut of high-rise housing has given condo investors an abundance of choice.
Sales of newly built single-family homes jumped 17 per cent in February from a year ago, while condo sales were up 8.6 per cent, the building industry association said. Condo sales actually fell 6 per cent within the City of Toronto from a year earlier, although they rose in the suburbs.
But while Toronto’s condo boom tends to steal the spotlight, the shift away from single-family homes toward high-rise condo development has become a national phenomenon.
Investment in new high-rise construction jumped 6.4 per cent across the country in January compared to a year earlier, according to new numbers from Statistics Canada. At the same time, investment in construction of new single-family homes rose by just 2.3 per cent.
Much of that growth came from Alberta, where, despite a drop in oil prices, spending on new condo construction rose 14 per cent compared with the same time last year, a reflection of the fact that construction went ahead on many projects that were started when oil prices were still high.
British Columbia and Ontario, two provinces whose housing markets stand to benefit the most from cheaper oil, also saw spending on new home construction rise in January, up 11 per cent in B.C. and 3.6 per cent in Ontario.
Meanwhile, residential building investment fell 13.5 per cent in Manitoba and 9.7 per cent in Saskatchewan, Statistics Canada said, as the two resource-based provinces dealt with the aftermath of an earlier building boom.