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Carras: Is GTA market pushing the limits?
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The Toronto Star-
There is no shortage of chatter about the GTA new home market. And why not — it’s an important market that generated approximately $16.4 billion in sales in the first three quarters of 2011. Most of that is having a direct impact on the local economy and all of it will have a major impact on the size and shape of our community going forward.
But is the GTA new home and condominium market pushing the limits?
RealNet is the official source of new home and condominium information for the GTA real estate and development industry, powering the Building Industry and Land Development Association (BILD), the Toronto Real Estate Board and the decisions of more than 35,000 professionals. With RealNet’s official September market report having just been released, it’s a good time to examine the GTA new home and condominium market to determine if it is in fact pushing the limits.
Let’s look at three key gauges of the real estate market: Sales, inventory and price.
In terms of sales, RealNet is tracking a record-high year for new highrise home sales in the GTA, pushing the upper limit to record levels. September’s 2,652 new condominium sales made it the strongest September on record, bringing the year-to-date new condominium sales to a record high of 20,729 sales.
It’s a very different story in the lowrise market, as September sales of a modest 1,120 units took year-to-date sales to 13,341 sales, the third lowest level since 2000.
When we combine the record-high highrise sales with near record-low lowrise sales, we find that total new home sales in the first three quarters of 2011 have produced a total of 34,070 sales — currently the third highest level since 2000.
Turning our attention to the second market gauge, active builder inventory, we find limits also being pushed — but in the opposite direction. As of September 30, 2011 there were 6,079 units available for sale in lowrise builder sales centres across the GTA, pushing the limit for active lowrise inventories lower.
At the same time, highrise inventories stood at a more-average 14,249 units. Total new home inventories (both lowrise and highrise combined) were also pushing the lower limit again, at 20,328 units, well below the long-term average range of between 25,000 and 30,000 units.
This combination of high sales and low inventories helps to explain why the third market gauge, index price, is pushing the upper limits. As of September 30, the index price for a new highrise home stood at $444,378, while the price of a lowrise home was $542,778, a difference of $98,401.
The prices of both lowrise and highrise homes reached peak levels in June 2011 and have been moderating slightly since then. The index price for a new highrise home today is roughly where the index price for a lowrise home was just two years ago.
So, is the GTA new-home and condominium market pushing the limits? The simple answer: Yes. It is pushing the upper limit in highrise sales, pushing the lower limits in lowrise sales and total inventories, and pushing the upper limit in index price for both lowrise and highrise homes.
But in the end, the question of if we are pushing the limits may be less important than how we push the limits. When it comes to buying a new home or new condominium, taking an informed approach to the market will always lead to better results.
George Carras is the president of RealNet Canada Inc. His column appears in New in Homes and Condos the last Saturday of every month. For more information, visit www.realnet.ca.
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