Pent-up demand for townhomes building in the GTA
Condos may be the choice for many in the increasingly expensive GTA, but not everyone wants to live in a box in the sky. More and more new home buyers are looking for affordable lowrise options such as townhomes. Emphasis on the word affordable.
The problem? The supply just isn’t there – and the pent-up demand is growing.
Appealing especially to young families, townhomes provide more space and flexibility than condos, and generally are far more affordable than single-family homes.
“Both stacked (townhomes) and (row) townhouses form a key component of the Missing Middle – the built forms between high-density condo and low-density single-family housing,” Matthew Boukall, vice-president, product management, Data Solutions at Altus Group, told Homes Publishing.
Altus recently studied the sector for one of its regular housing reports, surmising that townhomes play an increasingly important role in in the new home sector, not just in the GTA but across Canada.
In the GTA, new townhouse sales have plummeted in the past two years – both in absolute terms and as a percentage of total new home sales (to just seven per cent of the total in the first half of 2018), Altus says.
Affordability and availability remain an issue.
In the GTA, the key challenge to supplying this built form has been finding land with the right entitlements to allow and support this construction, Altus reports. Much of the land along Toronto streets support higher density condo product or is priced at a level which encourages rezoning to support this density.
“What can support more townhouse development is allowing rezoning of the land between the existing single-family communities and the corridors for more mid-density development,” Boukall says.
Although townhouse land (medium density) sales in 2017 were actually up over 2016, they are trending lower in 2018. Part of the problem is a lengthy approval process. “Year to date in Toronto, we have only tracked five approved townhouse projects, representing less than 350 units,” says Boukall. “Obviously, we need more product to meet the market demand. The positive note is that developers are proposing more product, with almost 1,500 new units applied for in 2018.”
Stacked townhouses, in which one row of townhouse units is stacked on top of another, provide a more affordable option to single-family homes, given higher densities. They also offer many of the appealing aspects of condominiums, but without living in a highrise environment.
However, they still play a relatively smaller role than traditional townhouses in the overall townhouse arena, Altus says.
In the Vancouver market, for example, new stacked townhouse units accounted for slightly more than 200 sales on average per year in 2015-17 – about six per cent of all new townhouse sales.
In the GTA, where stacked townhouses have made a larger dent, they remain a niche segment, accounting for about one in five new townhouse sales in recent years.
Part of the challenge with stacked townhouses versus rowhomes are those similar to condominium apartments – longer planning and construction timelines, and other residences adjacent on all sides
Both housing types will play an important role throughout the GTA in the future, but stacked townhouses are expected to become more popular given the better affordability provided by the higher density housing type.
“That said,” Boukall adds, “traditional row townhouses are the more common housing type in the GTA and as such, account for more sales compared to the stacked townhouse product. Row townhouse product has been accounting for a growing share of the single-family new homes sales in the GTA, currently accounting for 42 per cent of the total single-family sales activity in the GTA.”
WHERE IN THE GTA?
So, prospective GTA new home buyers, which areas hold the most promise in terms of future townhome availability?
While townhouses are expected to remain a popular housing option throughout the GTA, both Toronto and the York region share the most medium density land activity in the region, and should see increased development activity as a result in 2019 and beyond.
“The Peel region, most notably Brampton, is the most active for stacked and row townhouse sales in 2018 and should continue to see demand supported by an available land supply and comparably affordable prices,” says Boukall.