January 2, 2012 – If you’re looking to buy a new lowrise home in the Greater Toronto Area in 2012, you may be wondering where, what and when to buy. Indeed, when you’re talking about one of Canada’s largest and historically strongest real estate markets, the options are plentiful.
Generally speaking, the where and what are largely determined by where you work, how much of a commute you want and whether transportation options include mass transit or driving only; how much you can afford; and the type of home you and your family need.
As for the when, two key things are in your favour for 2012: interest rates are expected to remain low well into the year; and the GTA market, despite the economic challenges in Canada and elsewhere, is coming off a strong 2011, and is forecast to do well again this year.
“The market may feel somewhat slower than previous periods of high activity as buyers practice more restraint in light of slowing economic fundamentals,” Shaun Hildebrand, CMHC’s senior market analyst for the GTA, said at the federal agency’s recent Housing Outlook Conference.
And this ringing endorsement from ReMax: “Canadian residential real estate defied conventional logic and outperformed expectations in 2011, posting another solid year of housing activity virtually across the board,” according to the realty’s Housing Market Outlook 2012. The forecast for 2012 shows the upward trend moderating somewhat, but still ahead of 2011 figures.
For the GTA market, specifically, ReMax forecasts a three-per-cent increase in sales activity, and as much as five-per-cent gain in price appreciation.
While ReMax’s figures are based largely on resale activity, as opposed to new homes, it’s an indication of overall market performance. In addition, experts suggest you look at the long term – five to seven years – when buying a home, in which case your property, while new today, becomes part of this resale market when you put it up for sale.
In new lowrise homes in the GTA, sales are trending down, particularly in singles. This is not because the demand isn’t there, but because there are a limited number of units available, Hildebrand says.
Will Dunning Economic Research forecasts GTA new lowrise home sales activity could drop to 14,855 units in 2012 from 17,130 in 2011, and to 11,881 units in 2013.
Highrise construction will dominate GTA housing starts in 2012 – with 19,000 to 23,000 units, compared to 12,000 to 16,000 in lowrise – CMHC says. Condos have exploded in popularity in recent years, as they fill the void for affordable new homes, particularly close to the downtown core.
In the lowrise category, townhomes are proving a popular choice and sales are trending up, since these homes are more conducive to infill development and are more affordable for buyers.
So, given these trends, where are the new lowrise home opportunities in the GTA in 2012?
Looking at the growth in average resale prices over the last three years, you don’t have to buy in the downtown core to do well in terms of value gains: Richmond Hill, Vaughan and Markham are examples of high performing areas; Scarborough, Whitby, Brampton and Mississauga are examples of areas that perform (a little less) well but are more affordable.
Some of the best performing areas, though, are also among the more expensive. Looking at the overall average resale price for the GTA, Richmond Hill, while a strong performer, is also priced about 25 per cent higher than the average for the GTA.
Due to land constraints and other issues, the majority of the new condo activity is going to be centred in the 416 area, and expanding into the 905 in coming years.
Meanwhile, in lowrise, not to say that there are no opportunities in 416, most of the activity takes place in the 905, with the highest concentrations recently found in Brampton and Vaughan, Hildebrand says.
“In general, the construction of single-detached homes will be limited due to rising population densities across the GTA, greenbelt boundaries, infrastructure capacities and provincial growth plans,” he told New Home Guide. “A lot of the available supply is located in the Durham Region, so expect activity to begin shifting there to some extent in 2012.”
For example, the Durham Region – areas such as Oshawa and Clarington – has about eight months’ supply of new lowrise homes, while the rest of the GTA has about three months’ worth, Hildebrand says.
The result of this limited supply and high demand of lowrise homes in the GTA is rapid price growth – which may not be so good while you’re still shopping, but it bodes well for the value of your new home once you buy it.