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New home sales

2018 GTA new home sales drop to lowest mark in nearly 20 years

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2018 GTA new home sales drop to lowest mark in nearly 20 years

New home sales

Last year saw the lowest total sales in almost 20 years in the GTA new home market, the Building Industry and Land Development Association (BILD) reports.

Overall in 2018, there were 25,161 new homes sold in the GTA, according to Altus Group, BILD’s official source for new home market intelligence, making 2018 the year with the lowest number of new home sales in the GTA since Altus Group started tracking new home data in 2000.

New record low

There were 21,330 condominium units sold in 2018, including those in low-, mid and highrise buildings, stacked townhouses and loft units – down 38 per cent from 2017 but only four per cent less than the 10-year average. Setting a record low since Altus began tracking new home data in 2000, there were only 3,831 single-family homes sold in 2018, including detached, linked and semi-detached houses and townhouses (excluding stacked townhouses). This is down 50 per cent from 2017 and down 74 per cent from the 10-year average.

“A number of factors combined to produce the drop in GTA new home sales in 2018,” says Patricia Arsenault, Altus Group’s executive vice-president, Data Solutions. “More stringent mortgage stress testing, rising interest rates and lack of single-family product affordable to a broader range of buyers all played a role. As well, the record new condo apartment sales in 2017 brought forward some demand that would otherwise have occurred in 2018.”

In December, the benchmark price for new condos was $796,815, up 11.2 per cent over the last 12 months. The benchmark price for single-family homes was $1.14 million, down 6.7 per cent over the last 12 months.

Out of balance

“From our point of view, the market is out of balance,” says David Wilkes, BILD president and CEO. “We must continue to work with all levels of government to ensure that policies don’t artificially price consumers out of the market.

“We commend the provincial government for taking action toward increasing housing supply in Ontario,” Wilkes adds. “We join other industry groups in calling on the federal government to revisit the stress test and allow a longer amortization period for first-time buyers. And we look forward to working with our municipal partners on removing barriers to development such as excessive red tape and outdated bylaws.”

At the end of December, there were 15,768 new homes available for purchase, comprised of 10,687 condominium units and 5,081 single-family homes. Remaining inventory includes units in preconstruction projects, in projects currently under construction, and in completed buildings.

 

December New Home Sales by Municipality

December 2018 Condominium apartments Single-family Total
Region 2018 2017 2016 2018 2017 2016 2018 2017 2016
Durham 40 17 50 44 15 75 84 32 125
Halton 48 163 59 21 47 93 69 210 152
Peel 108 89 130 32 11 152 140 100 282
Toronto 479 404 1,684 9 8 31 488 412 1,715
York 129 195 345 30 62 274 159 257 619
GTA 804 868 2,268 136 143 625 940 1,011 2,893

Source: Altus Group

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The housing outlook for 2019

GTA among the most promising new home outlooks for 2019, Altus Group says

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GTA among the most promising new home outlooks for 2019, Altus Group says

The new home sector in Canada had a challenging year in 2018, but markets in the Greater Golden Horseshoe, including the GTA, have among the most promising outlooks for 2019, according to Altus Group.

Increased regulations, higher interest rates, new taxes and higher Development Charges are testing the industry,  Altus Group says in its New Home Outlook for 2019.

Altus Group is a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry, and tracks new home development and sales activity across the country.

At the start of 2018, the supply of available new homes in both the Vancouver and Toronto markets was constrained, particularly in the condominium apartment sector. The lack of available product contributed to the rapid rise in pricing in 2017 and impacted sales volumes at the start of 2018.

In Alberta, the new home sector, along with the rest of the housing market, continued to be impacted by low energy prices and weaker economic activity. The opposite was the case in Montreal, where a sharp increase in demand for new homes led to peak sales levels.

The outlook at the end of 2017 was that the market would continue to see reasonably strong demand in 2018, but sales would be impacted by the new mortgage regulations and other new policies, taxes, and regulations – the degree to which was unknown.

Looking at 2018’s market performance year-to-date, Altus can see that demand was impacted in the major markets, most significantly in the single-family and higher-end townhouse segments. New condominium apartment sales have also moderated in Vancouver and Toronto where the incredibly strong demand seen in 2017 has softened in the current year. Some of the moderation is normalization from the frenzied market pace noted in recent years.

KEY FINDINGS

Greater Toronto Area

The GTA market came off a record new condominium apartment sales year in 2017. However, the impacts of mortgage rule changes and new development charges contributed to a decline in project launches and lower sales to start the year. Sales and project launch activity have increased in the back half of the year, but year-to-date sales remain down by almost 50 per cent compared to 2017.

While sales have been lower, pricing for new condominium apartment product in the downtown area has remained fairly stable with overall average prices trending towards $800,000.

New single-family sales continued to decline in 2018. Although availability of product to purchase has increased, it remains beyond the reach of most buyers.

Hamilton and Kitchener-Waterloo

Markets outside of the GTA have continued to benefit from their relative affordability compared to Toronto, particularly in Kitchener-Waterloo, where the new supply of condominium apartment product experienced strong demand in 2018. Both markets benefit from markedly better pricing compared to the GTA, where lower average prices for both new condominium apartment and single-family housing makes it a much more buyer-friendly market.

Promised improvements to transit, which will take several years to implement, will enhance commuting options throughout the Greater Golden Horseshoe, thus providing greater opportunities to live in markets outside of the GTA.

Montreal

Montreal saw a strong increase in new home sales over the past three years and continues to experience robust demand for new condominium apartment homes. Given the growth in sales, many of the challenges seen in the other large markets have started to impact Montreal – rising costs, elevated inventories of under construction product and increased investment activity. Despite the challenges, year-to-date sales activity remains strong and is trending slightly higher than last year.

Edmonton

The Edmonton market has been facing challenges from elevated inventory levels, a large stock of completed and unsold new homes and the impact that weak energy prices is having on housing demand. Consumers’ mortgage qualification has become a more significant challenge for new home projects, resulting in a year-over-year decline in sales levels by almost 50 per cent for both townhouse and condominium apartment product. The slow pace of sales has also meant that several projects have shifted to purpose-built rental.

While the market has been slow, there are some bright spots with development in the Ice District experiencing reasonably strong demand, along with well-priced townhouse developments in the suburban markets.

Calgary

The Calgary market is performing stronger in 2018, with increased sales of both new condominium apartment and townhouse product on a year-over-year basis. This growth has been exclusively in the suburban markets where new condominium apartment and townhouse sales have exceeded 2017 numbers.

While sales in the suburbs are tracking higher, the inner city and downtown markets are seeing weaker demand and lower sales volumes with higher office vacancy and lower downtown employment impacting housing demand near the core. Conversely, the strongest new home sales in the suburbs have been occurring in regions near employment centres.

Vancouver

Leading into 2018, the Vancouver market was the tightest of the markets examined, in terms of available new homes with only 1.8 months of inventory. This year, new project launches, particularly along transit lines and in the Fraser Valley, have added much needed inventory and boosted the supply to 3.3 months of inventory – although this remains the lowest in the country.

The frenzied pace in the market has softened with the sales rate at launch moderating, while price growth has stopped and even pulled back in certain segments of the market. A key challenge that has become more apparent as of late has been the price sensitivity of consumers, with higher-priced projects, or those priced above the competition, experiencing below average sales rates.

2019 Outlook

The outlook for housing demand in 2019 remains positive across the country with elevated immigration levels, continued demand from first-time homebuyers and tight rental vacancies and elevated rents encouraging homeownership. The key pressures that Altus Group sees continuing to impact the new home market in 2019 are higher interest rates and housing affordability constraints, rising construction costs and development charges impacting developers, and weaker economic growth potential in certain regions constraining demand.

Across the major markets in Canada, Altus Group believes the markets in the Greater Golden Horseshoe, including the GTA, have the most upside potential for an increase in sales activity in 2019 given the depth of the decline in 2018 and building off of the sales recovery noted in the back half of 2018.

Calgary and Edmonton will continue to be impacted by the weaker economy, but are not forecast to experience a material decline in overall sales volumes given the current levels of activity in each market.

The two markets that may see a decline in sales activity in 2019 are Montreal and Vancouver – but for very different reasons. Montreal had a strong sales year in 2018 and 2019 volumes are expected to decline as the market returns to more normal conditions. The Vancouver market, which is currently exhibiting the most potential for downside risk, is expected to see a modest decline in sales volumes as consumers react to higher borrowing costs and developers react to escalating construction costs in the face of lower revenue opportunities. With that said, the sales volumes in 2019 are still anticipated to be at or close to the 10-year sales average for the market.

altusgroup.com


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New home market

GTA new home market back to typical sales and openings levels in November

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GTA new home market back to typical sales and openings levels in November

New home market

The GTA new home market saw more typical activity levels in November, both in new home sales and new project openings, after a relatively strong October, the Building Industry and Land Development Association (BILD) reports.

There were 2,823 new homes sold in November, according to Altus Group, BILD’s official source for new-home market intelligence. Condominium apartments in low-, medium- and highrise buildings, stacked townhouses and loft units accounted for 2,454 new home sales in November, down 24 per cent from November 2017, but only sixper cent less than the 10-year average. Single-family home sales, with 369 detached, linked and semi-detached houses and townhouses (excluding stacked townhouses) sold, were up eight per cent from last November but down 71 per cent from the 10-year average.

Remaining inventory increased month over month, to 16,797 units, comprised of 11,254 condo apartment units and 5,543 single-family units. Remaining inventory includes units in preconstruction projects, in projects currently under construction, and in completed buildings.

Strong finish

“The condominium apartment market in the GTA is finishing off the year on a stronger note than it started,” says Patricia Arsenault, Altus Group’s executive vice-president, Data Solutions. “Both builders and buyers have re-engaged in stronger numbers in recent months, signalling that the downturn that followed record activity last year may be coming to an end.”

The benchmark price for both condo apartments and single-family homes increased slightly in November compared to the previous month. The benchmark price for condo apartments was $786,602, which was up 11.9 per cent over the last 12 months. The benchmark price for single-family homes was $1,150,823, down 5.9 per cent over the last 12 months.

Although the housing market continued to show signs of recovery in November, it will continue to operate below capacity until fundamental issues that are restricting supply and demand are addressed through government policy, according to David Wilkes, BILD president and CEO.

No more talk

“The time for talk is done and our region needs action now to ensure we build the more than 50,000 new homes needed annually to support the GTA’s growing population,” says Wilkes. “Our industry is encouraged by the provincial government’s commitment to unlocking supply. We will continue to call on municipal governments to expedite approvals of new developments, and on the federal government to undo the negative effects of the outdated stress test on consumers’ ability to purchase homes.”

 

November new home sales by municipality

November 2018 Condominium Apartments Single-Family Total
Region 2018 2017 2016 2018 2017 2016 2018 2017 2016
Durham 404 16 57 54 75 171 458 91 228
Halton 101 204 114 107 88 415 208 292 529
Peel 736 181 231 52 61 132 788 242 363
Toronto 1,124 2,425 2,678 17 21 110 1,141 2,446 2,788
York 89 387 317 139 97 837 228 484 1,154
GTA 2,454 3,213 3,397 369 342 1,665 2,823 3,555 5,062

 Source: Altus Group

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Affordability Is A Challenge

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Affordability Is A Challenge

Housing supply is not rising in response to increased demand

Every fall, BILD invites experts on economics and housing to join us for breakfast and speak to our members about what the GTA housing market will look like in the coming year. This fall was no exception and I was heartened by much of what I heard about current and future trends from Patricia Arsenault of Altus Group and Dana Senagama of the Canada Mortgage and Housing Corporation (CMHC). I also saw we have much left to do around housing supply and affordability in our region.

There’s no doubt we have a lot to look forward to in the GTA. Economic conditions are expected to be solid in the short term, with the employment growth rate projected to be 1.8 per cent in 2019, according to Arsenault, who is Altus Group’s executive vice president, data solutions.

More GTA households than last year are planning renovations of over $5,000 in the next year, and the percentage of GTA households that currently rent but plan to buy a home in the next year has rebounded after softening last summer, according to Altus Group’s survey.

But these survey results only indicate what homeowners and potential new homebuyers intend to do, not what they are ultimately able to do, and Arsenault noted that households may take longer to save for that first home in the face of new mortgage hurdles and housing affordability challenges. The prices of condo apartments, which used to offer potential homebuyers a more affordable choice than single-family homes, have been rising, reducing the advantage of this option. In September, the benchmark price of new condo apartments was $789,643 and the benchmark price of new single-family homes at $1,119,533.

Despite rapid price gains in both ownership and rental markets, the supply response has been weak or inelastic, said Senagama, who is CMHC’s manager of market analysis. That means our housing supply is not rising in response to increased demand for housing and the corresponding increase in the prices of homes, as the law of supply and demand would lead us to expect. In fact, Senagama showed that Toronto is one of the markets in Canada that are not at the risk of overbuilding.

I was not surprised to hear this. BILD has consistently delivered the same message. We have said that we are not building enough housing to accommodate the 115,000 new residents who are arriving in our region every year. We should be building 50,000 homes every year, and last year we only built 38,000. A big reason for this supply shortfall is the lengthy development process that housing projects face in the GTA, slowed down by outdated regulation and red tape.

We should be updating zoning bylaws and official plans and streamlining the list of conditions for municipal approvals, so that we can build the housing our growing region needs. Only then will potential homebuyers be able to afford to make their dream of owning a home a reality.

Dave Wilkes is president and CEO of BILD (Building Industry and Land Development Association), and can be found on: Twitter.com/BILDGTA) Facebook.com/BILDGTA YouTube.com/BILDGTA and BILD’s official online blog: BILDBlogs.ca

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Don’t Doubt The Market

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Don’t Doubt The Market

There is no shortage of demand at the launches of new projects

The GTA housing market is as robust as ever and things have been humming along quite nicely for many years now.

And yet there will always be those who believe we are doomed, that the good times cannot continue for the GTA’s hot housing market — that it’s no doubt headed for an inevitable crash.

Well, that’s just not the sentiment we’re seeing at In2ition Realty as we’ve launched a series of successful projects across the region in recent weeks.

There was certainly no shortage of demand at the launch this summer of the first tower at Universal City, a Chestnut Hill Developments master-planned community in Pickering. The project enjoys lake views and is located just minutes from the GO Transit station. It sold out in record time and a second tower of 324 units just launched last month. The interest for tower two was equally as strong.

In Port Credit, on the other side of the GTA, it was the same story with the recent launch of Tanu Condos, a 204-unit tower and townhouse project by Edenshaw Developments. We had a lineup on the first day of launch!

Truth be told, Toronto condo builders can’t launch developments quickly enough to satisfy the insatiable demand.

It wasn’t all smooth sailing for the GTA housing market in 2018, mind you. The introduction of a new stress test on mortgage applicants certainly had an impact on home sales, sidelining some buyers.

And the GTA housing market faces considerable ongoing challenges, including trade labour shortages, development approval process and timing, project cost escalation, ability to secure financing, profit margins, land availability and cost … there are tons of hurdles for the building industry to contend with.

Although sales figures are down 40 per cent from last year, a portion is from lack of supply. In 2017 we saw 128 launches in highrise condos versus 56 in 2018.

The Toronto Real Estate Board (TREB) reported a 6 per cent uptick in regional home sales in October 2018, compared to the same month a year earlier. And the average sale price of a detached home in the GTA last month was up 3.5 per cent on a year-overyear basis, to $807,340. The average sale price for a condo in Toronto was $603,153, compared to $461,013 in the 905.

Renovation spending is also at an all-time high: $12.3 billion was spent on home alterations and improvements in Ontario in the first half of 2018, according to Altus Group.

Homebuying intentions are up, as well, despite affordability and qualifying challenges. An Altus Group survey of current homeowners and current renters showed that most GTA households are saying yes, they plan to buy a home in the next year or so.

The evidence doesn’t lie. Households and investors alike see the GTA housing market as a quality long-term investment. And why shouldn’t they? A thriving and diverse regional economy and a steady stream of 100,000-plus new arrivals in the GTA each year — more migration than any other city in Canada — will keep this market strong for years to come.

Debbie Cosic, CEO and founder of In2ition Realty, has worked in all facets of the real estate industry for over 25 years.

In2ition.ca

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THE INDUSTRY INSIDER: Affordability is a challenge

Affordability is a challenge: The prices of condos have been rising

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Affordability is a challenge: The prices of condos have been rising

The prices of condos, which used to offer homebuyers a more affordable choice, have been rising, reducing the advantage of this option.

Every fall, BILD invites experts on economics and housing to join us for breakfast and speak to our members about what the GTA housing market will look like in the coming year. This fall was no exception and I was heartened by much of what I heard about current and future trends from Patricia Arsenault of Altus Group and Dana Senagama of the Canada Mortgage and Housing Corporation (CMHC). I also saw we have much left to do around housing supply and affordability in our region.

There’s no doubt we have a lot to look forward to in the GTA. Economic conditions are expected to be solid in the short term, with the employment growth rate projected to be 1.8 per cent in 2019, according to Arsenault, who is Altus Group’s executive vice president, data solutions. More GTA households than last year are planning renovations of over $5,000 in the next year, and the percentage of GTA households that currently rent but plan to buy a home in the next year has rebounded after softening last summer, according to Altus Group’s survey.

But these survey results only indicate what homeowners and potential new homebuyers intend to do, not what they are ultimately able to do, and Arsenault noted that households may take longer to save for that first home in the face of new mortgage hurdles and housing affordability challenges. The prices of condo apartments, which used to offer potential homebuyers a more affordable choice than single-family homes, have been rising, reducing the advantage of this option. In September, the benchmark price of new condo apartments was $789,643 and the benchmark price of new single-family homes at $1,119,533.

Despite rapid price gains in both ownership and rental markets, the supply response has been weak or inelastic, said Senagama, who is CMHC’s manager of market analysis. That means our housing supply is not rising in response to increased demand for housing and the corresponding increase in the prices of homes, as the law of supply and demand would lead us to expect. In fact, Senagama showed that Toronto is one of the markets in Canada that are not at the risk of overbuilding.

I was not surprised to hear this. BILD has consistently delivered the same message. We have said that we are not building enough housing to accommodate the 115,000 new residents who are arriving in our region every year. We should be building 50,000 homes every year, and last year we only built 38,000. A big reason for this supply shortfall is the lengthy development process that housing projects face in the GTA, slowed down by outdated regulation and red tape.

We should be updating zoning bylaws and official plans and streamlining the list of conditions for municipal approvals, so that we can build the housing our growing region needs. Only then will potential homebuyers be able to afford to make their dream of owning a home a reality.

David Wilkes is president and CEO of BILD.

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Condominium Cancellations: Why All The Fuss?

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Condominium Cancellations: Why All The Fuss?

There has been much talk in the press this year regarding some high-profile condominium cancellations. One of the most high profile of the cancellations was the 1,200-suite three-building project Cosmo by Liberty Developments, which left purchasers scrambling to find equivalent units in the current marketplace. Overall, for 2017 until June 30, 2018, Altus Group reports 17 projects were cancelled for a total of 3,627 units.

The reality is that over the last seven years, an average of 17 per cent of proposed units have been cancelled for a variety of reasons. The number of units cancelled this year is in line with the average.

In the past, however, most of the projects that have been cancelled due to their uneconomic viability resulting in a lack of financing, a lack of sales or delays in municipal approvals. It should be noted that builders are extremely limited under the current Tarion regimen and have few termination rights (other than purchaser default). These include: (1) lack of specified government approvals; (2) lack of a specified number of presales; (3) unavailability of satisfactory financing; and (4) failure of the purchaser to provide evidence of finance ability. All need a specific outside date to satisfy the applicable condition which simply cannot be later than the outside date under the Tarion rules, as selected by the builder.

Many of the more recent cancellations are not due to lack of sales, but rather a lack of financing and the underlying reasons are usually delays in municipal approvals and escalating costs as a result of these delays.

The public and the press have speculated that the real reason behind these cancellations is so that the builder can resell these units at current and significantly higher prices. The actual reality is far from this conjecture.

The last thing that builders want to do is cancel a project. It reflects on their credibility and reputation both with purchasers, trades and Tarion. Projects are only cancelled within the limited termination rights that builders have under the purchase agreement and only as a last resort. The cost of cancelling a project can be significant in terms of lost marketing fees, real estate commissions and the additional carrying cost of the lands.

One of the real culprits in these unfortunate cancellations is the ever growing red tape and delays in obtaining government approvals. These can include anything from actual rezoning and official plan amendments, site plan approvals and signoffs by various departments to permit the issuance of building permits. As a result of these delays, carrying costs mount, construction costs continue to escalate while the developer is prevented from signing up his construction contracts without having a firm construction start date. And to add salt to the wound, the municipality itself creates extra costs by raising its development charges, park levies, planning fees and building permit fees while the builder waits for his approvals to come through.

The most recent example of this was the significant increase on November 1, 2018, of Toronto development charges on all projects. Avoiding the increase requires payment only when full building permits have been issued. Numerous projects had completed their submissions and were awaiting their building permits, which, in many cases, were delayed by the city beyond November 1, 2018. This alone has resulted in significant increases in DCs that may or may not be passed on to the purchaser. At the end of the day, every development needs to make a reasonable return. Banks will simply not finance projects where this return is not evident and, without bank financing, the projects simply cannot be built. The provincial government has recently asked for input from Tarion and the residential building industry as to the causes of the condominium cancellations and what can be done to best protect purchasers from the unfortunate results of a condominium cancellation.

The reality is that purchasers buy into projects at a very early stage, many even before full approvals are available, on the basis that they are getting in at the ground floor at a lower price. The downside of getting in early is that there is a higher risk of a project cancellation if the approvals do not come through or costs change materially such that financing is not available. Those purchasers that do not want to be exposed to those risks can simply wait to purchase a project at a later stage of the development, i.e. when approvals are in place, or when construction has commenced, or even when construction has been substantially completed so that they can plan their move-in timeframe.

There are certainly other tweaks that can be made to the process to ensure transparency and fairness. Payment of some interest to purchasers on deposits above the currently low statutory rate, and disclosure to Tarion of the underlying economic reasons as to the lack of financing by an independent cost consultant, could be considered.

At the end of the day, the real key in this environment is to properly educate consumers as to the risks of buying projects from plans. The problem with most new condo buyers is that they do not read the documentation or pay their lawyers to do so, other than the price and the adjustment clause. The solution is really to educate consumers as to these risks, no different from the risks of investing in the stock market or mortgages, or any other type of purchase or investment. Consumers need to go in with their eyes open.

Leor Margulies is a partner at Robins Appleby LLP.

https://www.robinsappleby.com/

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INDUSTRY EXPERT: Stress Buster

Stress Buster: Avoid needless home improvement stress with these simple steps

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Stress Buster: Avoid needless home improvement stress with these simple steps

Regular communication between you and your renovator is essential and may avoid problems.

Canadians love their homes. So much so that homeowners spent nearly $73 billion in 2017 on renovations, according to the Altus Group. That’s $20 billion more than is spent annually on building new homes across the country.

Unfortunately, everyone has a horror story about a home renovation gone wrong, from losing their deposit, spending more than you anticipated, or a project that took too long to finish. The reality is that the average homeowner doesn’t know all they should know when undertaking a renovation project.

Photography: Bigstock.com
Photography: Bigstock.com

To avoid disappointment and to set you on a path toward a successful renovation, RenoMark has come up with five steps to a worry-free renovation.

  1. Define your project. The more you know what you want out of the renovation, the more accurately the renovators can help you achieve that goal.
  2. Set your budget and expectations on the same path, if they are not realistic or in alignment, then you will be disappointed before you even start.
  3. Select the right renovator, you should look to reputable organizations such as RenoMark as a source of professional companies. Plus, these companies must adhere to the RenoMark code of conduct and the Association’s code of ethics, this alone means that they are a professional and not a fly-by-night company.
  4. Sign a contract. The contract should be reviewed by a lawyer and it will be the basis of understanding for the work moving forward. At a minimum, it should include costs, payment schedule, construction timeline, product-specific details, a communication protocol, warrantee clause, and a close-out plan. Avoid renovators who offer to do work without a contract in an attempt to avoid paying the HST. This type of renovator may also not be paying worker’s compensation or carry adequate insurance, leaving you at financial risk.
  5. Check on Progress. Regular communication between you and your renovator is essential and may avoid problems. During the course of a renovation, it is common for the homeowners to request changes or ask for additional work. These requests may affect the cost and time it takes to complete your project. It is important that you have a signed change order for all changes. Finally, remember to ask questions. The last thing anybody wants is to make an assumption or a guess that may lead to an error and then disappointment.

RenoMark.ca is a great resource to help you find the right renovator. RenoMark was established by the GTA-based Building Industry and Land Development Association (BILD) to identify professional contractors that have agreed to abide by a renovation-specific Code of Conduct. The RenoMark program has been endorsed by the Canadian Home Builders’ Association and the Ontario Home Builders’ Association.

David Wilkes is president and CEO of the Building Industry and Land Development Association (BILD), the voice of the home building, land development and professional renovation industry in the GTA.

For the latest industry news and new home data, follow BILD on Twitter, Facebook, BILD’s official blog, and bildgta.ca.


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Townhomes

Pent-up demand for townhomes building in the GTA

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Pent-up demand for townhomes building in the GTA

Townhomes

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.

GTA Starts

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.”

GTA Townhouse sales

STACKED TOWNHOMES

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.

GTA Stacked

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.

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GTA condo sales and prices hit record levels

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GTA condo sales and prices hit record levels

Condo TO web

With home prices seemingly forever on the rise, there is only one way for many GTA homebuyers to go – up, as in into highrise condos and other multi-family housing options.

Fueled largely by affordability – and the lack thereof in lowrise homes – resale condominium apartments and townhomes in the GTA now represents almost 37 per cent of total residential sales by the Toronto Real Estate Board (TREB), up from 30 per cent in 2013, according to a new report by ReMax of Ontario-Atlantic Canada Region.

ReMax report

Momentum has also been reflected in resale condominium values, which is the only property segment that held up against the 2017 market correction, ReMax says.

The average price of a condominium unit increased almost eight per cent to $551,761 between January and October 2018, up from $512,552 during the same period in 2017.

Townhomes were slightly ahead of last year’s pace, with values hovering at $571,058, compared to $568,165 in 2017. Prices of freehold properties, including single-detached, semi-detached, attached/row/townhouse and linked townhomes are all down year-over-year.

AFFORDABILITY KEY ATTRACTION

“The condominium lifestyle continues to resonate with buyers in the Greater Toronto Area for a number of reasons,” says Christopher Alexander, executive vice-president and regional director, ReMax of Ontario-Atlantic Canada Region. “While the affordability aspect is first and foremost, we’ve also a seen strong investor presence in recent years.”

Alexander cites a recent report by Urbanation and CIBC, which found that investors who bought condominiums for the purpose of renting accounted for 48 per cent of all newly completed units in the GTA in 2017. “The income potential, given today’s tight rental market, in addition to the overall return on investment, has been a serious draw for real estate investors.”

Immigration, population growth and lifestyle choices have also contributed to the uptick in demand for condo apartments and townhomes. Aging infrastructure, combined with a lack of transportation alternatives, longer commute times and the environmental component – with efforts to reduce carbon footprint – have all played a role in buyers choosing condominiums in Toronto proper that are close to both work and play, Alexander says.

DOWNTOWN THE CHOICE LOCATION

The most popular area for condominium sales remains the downtown core, with one in every five condominiums (21.9 per cent) sold in the area bordered by Bloor Street to the north, the lakeshore to the south, the Don Valley Parkway to the east and just past Dovercourt Road in the west.

“In spite of a proliferation of condominium developments over the past decade, supply and demand issues continue to persist in the core,” says Alexander. “Limited inventory continues to place substantial upward pressure on prices, with fewer affordable housing options available– and that includes condominium rentals.”

Average resale prices hover at $700,000 for condo units, with new construction closing in on $1,000 per sq. ft.

PROXIMITY TO TRANSIT

“Higher prices in the core are prompting buyers to consider condominium communities farther afield,” says Alexander. “New construction along subway lines to the north, east and west are exceptionally popular, especially with first-time buyers. Yonge Street north of Hwy. 401 comes to mind, as well as the Sheppard line between Bayview Avenue and Leslie Street. Combined, these two areas represent approximately 10 per cent of total resale condominium sales to date and continue to experience growth.”

Mississauga is the GTA’s second most popular destination for condominium living, accounting for 14 per cent of condominium sales so far this year.

Almost 51 per cent of condominium sales in the GTA occur under the $500,000 price point, but affordability is being threatened as builders and developers face skyrocketing construction costs and a land crunch within the GTA, and struggle to maintain the status quo, ReMax says.

“The necessity to ‘build up’ has never been more prevalent in a city that has seen its population climb from one census to the next,” says Alexander. “To prevent the run-up we’ve seen in housing values in the past, all levels of government must work together with developers to streamline the building process. We need to create more affordable GTA housing options that can accommodate buyers and renters at every price point.”

THE TOWNHOME OPTION

These trends generally align with the findings of another report, from Altus Group. Lack of affordability and availability of single-family new homes has buyers increasingly looking to townhomes as a lowrise home option. But supply issues in this category have seen new townhouse sales plummet in the past two years, in both absolute terms and as a percentage of total new home sales – just seven per cent of the total in the first half of 2018.

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