07 November 2011 ~ 0 Comments

Single Family Homes Becoming “precious commodities”

It seems not a day passes by where one of the major newspapers or news magazines is prophesying on something related to the real estate market in Canada and in many cases our fair City of Toronto.

I “borrowed” the headline of this blog from a recent article that ran in a major newspaper. Instead of passing along their interpretation (read: what will sell the most newspapers) I’ve decided to offer my own comments on these reported “precious commodities” known as single family homes.

Now for ease understanding I am going to describe single family homes as not being a condo, multi-family home (duplex or triplex) or an apartment building of any size.

With much talk of an impeding bust in the condo market these days some rationale can be applied to why we are seeing a surge in this form of housing builds and the subsequent rising value if single family homes.

There are many factors that have come into play with the Provincial Liberal Government enacting the Greenbelt Act in 2005 that essentially was put in place to curb sprawl under the guise of environmental reasons. With the availability of land becoming sparse many developers who used to mainly build low rise housing had shifted to today’s current marketplace of building high rise condominiums. Thus a shortage of land (supply) means an increase in prices (demand).

The GTA over the past few years has been attracting 80,000-100,000 new immigrants (which is to increase this year to 115,000) and all of these new people need somewhere to live. Few will be fortunate to buy, many will need to rent. Based on a complex formula which states that approximately 40,000 new units (or households) need to be brought into the marketplace to meet this demand the housing supply will be a combination of both high and low rise.

The funny thing is over the past 10 years the formula also states that we have needed the 40,000 new households to maintain the demand we have already had! When you look back 10 years ago and the subsequent years since we have averaged somewhere in the 26,000-35,000 range with the odd year reaching 40,000. The only difference is that now the ratios have flipped. We’ve gone from say 24,000 low rise builds and 10,000 high rise builds to 8,000 low rise and 26,000 high rise expected for this year.

So now it becomes clearer on why housing prices have been increasing for so long and especially in the single family home (low rise)  area. 

Less available land, yearly underbuilding for demand, fewer single family homes being built and most of the new condos being built today are not suitable for families = $$$$$ value for the single family home.

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