At the end of January, Altus Group Limited (Altus Group; TSX: AIF), a leading provider of commercial real estate services, software, and data solutions, released results of its 2015 Real Estate Review (The Review) of the GTA's 2015 new home market. The Review reveals a resilient housing market that includes record highs for both low and high density residential land sales, strong price increases (especially for low rise homes) and strong sales overall, despite an environment of modestly elevated high rise completions.
Residential land transactions in the GTA grew by 49% in 2015, reaching a record $4.2 billion, including $1.7 billion apiece for low and high density residential oriented investments. According to Altus Group's VP and Chief Economist, Peter Norman, this sizeable increase was evidence of a "strong industry confidence in the prospects of residential development." Despite the Canadian economy facing "economic headwinds," as according to Norman, "the GTA economy is picking up steam [as reflected] by the 2015 data on residential land sales, low and high rise new home sales, and of course, in the level of resulting construction."
Best Annual Low Rise Sales in 8 Years
Low Rise Price Index Reaches New Record
Low rise new home sales continue to rise, up 8% over last year, with 19,637 low rise sales recorded for 2015, approximately 15% higher that the 10 year average, while the annual sales totals were the third highest over the last decade. At the end of 2015, the average low rise sale fetched $829,766 up 18% from the same period in 2014, while the average price of a high rise home in the GTA was $453,083, remaining essentially unchanged. To this trend, Norman suggests that this is "not surprising, given the continued degree of pent-up demand for low rise homes in the GTA."
Second Consecutive Year with more than 20,000 High Rise Completions
New Record Low for Low Rise Remaining Inventory
While high rise homes remain more affordable, the high rise market has seen a 2% decline in total sales year after year. Despite this, the high rise market still managed to sell 21,658 units in 2015, the fourth highest number of annual sales in the last decade.
Residential Land Sector Soars to New Heights
Ground-Oriented Land Pricing Remain Resilient
The positive sales results for both low and high rise homes has encouraged ground related land prices to remain level with previous years. In the GTA, low density oriented sites averaged $812,345 per acre in 2015, while medium density or townhouse oriented development sites were down slightly from the record levels attained in 2014, with a price per acre averaging $1,834,818.
The results and practical implications of the data put forth by The Review will no doubt have real world repercussions for the ongoing evolution of the GTA housing market, and resultant condo construction boom that to date has continued to progress with dizzying speed. What the future holds no one can be certain, but an in-depth look at the findings of the above report will surely provide some clues. For more information on the Altus Group, check out their website at http://www.altusgroup.com.