<i>by Ben Myers</i>
<h3>The next hot areas</h3>
Demand for new housing in the GTA has never been higher. According to Altus Group data, the benchmark price for available <a href=”http://myhomepage.ca/homesmagazine/” target=”_blank”>new single-family homes</a> was $1,225,774 in December, a 23.2 per cent annual increase. The benchmark price for available new <a href=”http://myhomepage.ca/condolife/” target=”_blank”>condominium</a> apartments was $716,772 at the end of 2017, 41.3 per cent above the average value from December 2016. And for the second consecutive year, new condo sales set a record high. So the industry must be building more homes than ever, right?
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Actually, no. Housing starts in the Toronto Census Metropolitan Area (TCMA) reached 38,700 in 2017 according to CMHC, only slightly above the 10-year average of 36,800, but down 1 per cent from last year. There is a massive backlog of projects that have experienced strong absorption, but have yet to break ground due to a shortage of construction companies. The average single-detached home took 11 months to complete in 2017, the highest total ever tracked by CMHC, and it took 13.5 months to complete a semi and 14 months to complete a townhouse, both record highs. It took over two and a half years to finish construction on the average apartment (condo and rental) in the Toronto CMA last year, the second highest annual result to date.
Some buyers tired of waiting for new home deliveries are looking outside the region. According to Bullpen’s Residential Real Estate Round Up Report, the most popular destinations in December for prospective new homebuyers outside the GTA were Hamilton and Guelph. New homes are delivered much quicker in both of those markets. In fact, CMHC reports that it took just six months on average to build a single-detached home in Guelph last year. However, the prices are not as inexpensive as they used to be. Our report shows that the average new project in Hamilton has new single-family units starting from about $1,600 a square foot for about $570,000, while Guelph projects have lowrise product starting from $1,700/sf for $625,000.
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GTA buyers are taking notice of these more affordable markets. Ryan Waller of Home Group Realty Group in Guelph estimates that a quarter of all resale transactions in Guelph were to GTA buyers based on the fact that 25.5 per cent of buyers were represented by GTA real estate agents in 2017.
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With the new mortgage stress test in place, and GTA new home price growth through the roof, the next hot area for new homes will probably be outside the region. Based on our numbers, look for strength in the Brantford, Kitchener and Collingwood new home markets in 2018.
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<td width=”64%”><i>Ben Myers is President of</i> <a href=”http://www.BullpenConsulting.ca” target=”_blank”>Bullpen Research & Consulting</a>.</td>