By Lydia McNutt
The Toronto housing market has become a pipe dream for the average homebuyer. How did it get to this point, what are the consequences and is there a solution? The GTA's top home builders give their two cents on this million-dollar question.
Supply (or lack thereof) and demand
Tariq Adi, CEO of Adi Development Group Inc., blames the Greenbelt legislation for virtually stopping new lowrise construction, and putting a strain on lowrise housing supply and prices. "With all this happening, people are rethinking their entry into the property market and asking themselves, 'Do we really need the big house, and can we even afford it?' Unfortunately the answer for most is: no."
Amplifying the land supply problem are shortfalls in infrastructure, lack of transportation investments and the red tape hindering transit-oriented housing. But according to Adi, this is changing, with infrastructure investments in surrounding regions to accommodate this influx of residents. With downtown Toronto just a worry-free train-ride away, the more-affordable 905 is more enticing than ever.
"Compact housing that's close to transit... is the future of the suburbs," says Adi. "The province, through Metrolinx, along with municipalities are upgrading their local transit networks, and big investments are being made to move people efficiently and cost effectively. I think Canada's a little behind [when] compared to Europe and some cities in the U.S. in that regard, but the government is addressing these issues. As this is happening, people are rethinking where they want to live."
"The issue is not that there are no affordable choices in the GTA, just that the form of these affordable choices is much different than in the past."
-- Gary Mcilravey, Empire Communities
Adi points to Burlington, Ont. as a housing hot spot. The city saw residential price growth exceed 24 per cent in the last three years, he says. "It's centrally located on the Golden Horseshoe with multiple GO stations, which can have you at Union Station in less than an hour, catering to the buyer who doesn't care as much about being close to the big city, with transit at his doorstep.
Boomtown: the 905 and beyond
"Remaining low-rise inventory continues set new record lows across the GTA," says Gary Mcilravey, manager of market research at Empire Communities. Mcilravey quotes Altus/RealNet data, which indicates just one new sales development in Barrie with 10 units remaining. Similarly, Hamilton and Oshawa each have less than 85 detached lots available for sale. "This lack of low-rise inventory in the GTA has pushed buyers out to these markets and beyond in search of low-rise housing." He admits many purchasers at Empire's communities in Brantford, Caledonia, Hamilton and Niagara Falls have GTA origins. "As a result, prices are increasing in many outlying markets for new and for resale housing."
CMHC's latest Housing Market Insight report examined how GTA home prices have impacted neighbouring markets. The real estate ripples are being felt as far as St. Catharines and Niagara.
"The issue is not that there are no affordable choices in the GTA, just that the form of these affordable choices is much different than in the past," Mcilravey says. The new construction trend is high-density housing, not just downtown but in outlying areas as well. "Soon, we will see GTA-based buyers moving to outlying markets to purchase affordable [multi-family] housing, not just detached."
Intensification in The Six
Christopher Wein, president of Great Gulf Residential, says the resurgence of the rental market is another outcome of the GTA's housing affordability challenge. "Low residential vacancy rates in the GTA have caused upward pressure on rental rates. Despite this increase, renting remains a much more affordable alternative to ownership in many areas and as a result, has become a more common type of housing which we expect to increase with continued high levels of housing demand."
Tough (but necessary) choices
For homebuyers considering a move to the 'burbs to stretch their home-buying dollars, Mimi Ng, vice-president of sales and marketing at Menkes, calls for careful consideration of this choice -- and the consequences. "Think about the impact of commuting on the quality of their day-to-day life."
The GTA economy is strong, but a result is increased traffic and congestion, and longer commuting times. "That trend is expected to continue," Ng adds. "Say the morning commute from your new home is presently 30 minutes. How much longer does it get when the weather is snowy? Or when there's a major accident? How often are there major accidents during rush hour? What if, in a couple of years, that commuting time crept up to 45 minutes or an hour? Would that be acceptable to you?"
Should you buy a home, wait, relocate? For those in search of some concrete answers, Michoel Klugmann, vice-president of Lindvest, offers this: "Don't wait to buy in the GTA with the hope that prices will decrease. Toronto continues to be a place where people want to live. This is good news for those who invest here today."
To promote affordability, Klugmann says the GTA needs better transit and governmental policies that increase and streamline developable land supply, and a tiered development fee structure that favours certain housing types.
"The biggest threat to our strong real estate market is a generation of buyers who take on more debt than they can handle."
-- Brian Brown, Lifetime Developments
"Many assume they cannot afford a home in the GTA because of a rigid notion of what a home is. With a flexible mindset, they could 'relocate' to another form of housing, rather than moving away."
Klugmann points out that many European and U.S. cities favour high-density urban settings, and we're adopting this attitude locally. "The popularity of innovative forms of stacked townhomes is one indication that new concepts of 'home' are being embraced."
Some final thoughts of housing affordability...
When asked for some words of wisdom to homebuyers who find themselves priced out of this hot housing market, Brian Brown, vice-president of Lifetime Developments doesn't mince words. "Don't do it," he says, admitting that this must sound odd coming from a developer.
"The biggest threat to our strong real estate market and local economy is a generation of buyers who, in pursuit of the housing dream, throw caution to the wind, assume a crippling mortgage, and take on more debt than they can handle."
For more essential real estate reading, visit YP NextHome.
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