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GTA condominium market is the hot topic

George Carras
The Toronto Star
January 26, 2013

Earlier this week, RealNet Canada and the Building Industry and Land Development Association (BILD) released the official and comprehensive new-home market results for 2012.

A strategic review of those results suggests the formation of a market condition that’s best described as “detached reality.” This condition occurs when people’s perceptions of what’s happening in the real estate market end up influencing their actions more than the market reality itself.

The most-talked-about property market in Canada in 2012 was the GTA condo market.

Problem is, when people seeking to understand what’s happening in the Toronto condo market focus on the condo market in isolation, they end up lacking a healthy and well-informed perspective.

That’s because the condominium market does not exist in a vacuum — it is one segment of the overall housing market. And government policy over the last six years has been all about intensification, which means there has been significantly more highrise development and far less lowrise development.

So, what happened in the new condominium market in 2012? There were 18,755 new highrise homes sold in the GTA last year, representing approximately $9 billion of value.

How does that compare to previous years? You could look at it two ways: On one hand, it was the fourth-highest year on record for sales, and 14 per cent above the long-term average. On the other hand, sales volume in 2012 was 35 per cent lower than 2011, which was the best year on record.

In terms of prices, the RealNet highrise index price ended the year 0.4 per cent above last year, so prices remained relatively flat in 2012.

With all the attention in 2012 being paid to the condo market, it seems no one focused much on the alarming trend developing in the lowrise market: the detached reality.

As a result of government intensification policies, the supply of new lowrise homes, once the traditional form of housing in the GTA, has decreased by 52 per cent in a very short 48-month period.

Prices during that same period have increased by 44 per cent. The rapid increase of the average lowrise price in the last 12 months has been especially disconcerting: it has grown by 16 per cent through 2012, also the result of intensification policies.

Every home was at one point a new home. Homebuyers can only purchase what they can afford and what the industry is building. The industry builds what consumers want, can afford and allowed by the government. And the government puts in place the policies and solutions to control how it all happens.

Housing is something we’re all in together, and if intensification is the plan moving forward, then we should all make sure we have a full understanding of how to deal with the detached reality that’s now upon us.

 

Posted on Tuesday, February 12, 2013 at 02:22PM by Registered CommenterElaine in , | CommentsPost a Comment | References1 Reference

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