Photo: The City of Toronto
Record low housing supply has fuelled towering property prices in Toronto, as values hit an average of $1m for the first time.
The CMHC reduced its housing starts forecast to 32,400 units for the Canadian city this year, which falls short of the household demand of 35,000 to 38,000 annually. Builders finished construction on just 6,559 ground-oriented houses in the first half of the year, setting 2015 on pace for the lowest total in 20 years.
This trend is expected to continue, warns a new report from Fortress Real Developments, leading a multi-year period of underbuilding.
The shortfall in supply has already pushed up prices to over $1m, with low-rise sales increasing. With demand outpacing supply, low-rise unsold supply declined to a record low of just 5,155 units at the end of June (a three month supply), and prices spiked 16 per cent annually for new ground-related housing overall and 33 per cent for single-detached housing.
The record supply of completed and unsold new condominium supply in the GTA is “misleading”, argues the report, as it ignores context and units rented by the developer.
The percentage of condominium units sold at completion has been climbing for four consecutive years from 92.5 per cent in 2010 to 97 per cent in 2014 (97.6 per cent in June 2015). According to a 2015 survey, 51 per cent of Canadian builders/developers target absorption of 80 per cent to 95 per cent of their condominium apartment building at completion to maximize profit, and 25 per cent would rent unsold units at occupancy. When figures are broken down by project, it shows that 33 per cent of the unsold supply is located in just five of the 115 built projects with standing inventory, and 23 per cent of the unsold supply belongs to just two developers.
12 per cent of developers siad they would never lower their prices on unsold inventory, while 37 per cent would wait over six months to drop prices.