Wednesday, 23 January 2013 00:10

GTA single-family prices alienate cash-flow investors

Written by  Jemima Codrington
Rate this item
(0 votes)

According to RealNet Canada Inc., the price of a new, single-family home in the GTA has risen 16 per cent in one year –  a phenomenon limiting the cash flow horizons of would-be investors in those properties.

The building industry report suggests that government policies are responsible for driving up the average price of new homes in Toronto suburbs, reaching $632,868 in 2012 – a record high.

While this might be good news for investors who have already purchased in the area, soaring prices and limited land for development has driven acquisition costs out of reach for many others who are focused on cash flowing properties and not on value appreciation.

The discrepancy between prices in the condo market and the single-family home market is cause for particular concern, says RealNet president George Carras, as it has risen to $196,844, another record high.

Carras uses Vancouver as an example, where land restrictions have caused similar problems with development, resulting in a growing price gap between in-demand low-rises and condos.

“Vancouver is about 15 years ahead of us,” he warns.

Steve Deveaux, vice chair of BILD, agrees. “It’s a huge problem because there’s a $200,000 swing between average prices in condos and low-rise homes, and if we want choice and affordability, the low-rise market is just out of reach for a considerable part of the population.”

He blames “land constraints, regulatory requirements and a complex approval process fraught with delays” for tightening the noose around the low-rise market. He points to development charges in Oakville, which add roughly $65,000 to the price of a new home in the much sought-after area, as an example.

According to the report, low-rise home sales made up just 43 per cent of the GTA market last year, down from 75 per cent. In contrast, 60,713 condo projects were under construction in the same period, and 88 per cent of those were sold before construction began.

Although the GTA is still an area in demand, investors must be willing to pay a high price for a slice of the action.

“The demand is still very, very high for ground-related new homes, but the biggest issue now is affordability,” says Deveaux.

Last modified on Thursday, 24 January 2013 16:18

Leave a comment

Make sure you enter the (*) required information where indicated.\nBasic HTML code is allowed.

Partner Resources

Calgary Rentals by Hope Street Real Estate Corp.