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The growing price gap between condominiums and houses hit a record high last year in the Toronto area, as the market saw a huge jump in the number of newly built condos and buyers battled over a persistent shortage of houses.
The average price of a low-rise home in the Toronto area hit $705,813 in 2014, up 8 percent from the year before, while the average price of a high-rise unit rose just 4 percent to $454,476, according to new data from real estate research firm RealNet Canada Inc. and the Building Industry and Land Development Association.
The gap between condos and houses grew 16 percent in December compared to a year earlier, hitting a record of more than $251,000. (Low-rise homes consist of houses, including detached and semi-detached houses, townhomes and link homes, while high-rises encompass all condos and lofts.)
The growing price divide comes as developers have been under pressure to shrink the size of new condo units to keep costs down, while an insatiable appetite for houses, coupled with a shortage of supply, has driven up the cost of low-rise development.
“It’s creating a bit of an extremity condition in the market,” said RealNet president George Carras. “Living in a ground-oriented home is really becoming further and further out of reach.”
The story is largely one of government policy, not of low interest rates and easy credit, Carras says. Provincial intensification and land-use policies have limited new development in the greenbelt around the Greater Toronto Area and encouraged more density, helping to drive up the price of new homes and increase the supply of new condos. Last year saw a near-record number of 25,571 condo completions in the region, up from about 16,668 the year before.
While much of the jump in condo development is concentrated in the downtown Toronto core, the price gap between the two forms of housing has been spilling outward into suburbs like Mississauga and Vaughan, where detached homes can sell for as much as $1-million and a shortage of available land has also driven development toward high-rise projects.
Despite the growing price disparity, 2014 was a good year for sales of both houses and condos, with house sales jumping 46 percent to 17,745 and condo sales up 38 percent to 21,991. After years of shrinking condos, the average unit size increased slightly last year, from 796 to 816 square feet. The average price per square foot jumped 2 percent to $557. Condo developers also shifted back toward building more two-bedroom condos after years of building mainly one-bedroom units. The proportion of new condos that were two bedrooms rose from 31 percent in 2013 to 40 per cent last year, while one-bedroom units fell from 61 percent to 48 percent.