Average price of a new home in the GTA at the end of August was $547,864 ?
Does that mean you can easily buy a starter home in Toronto for $500,000 ?
Wrong.
That’s price of apartments in reality, not “home”.
You can never get a real proper “home” for less than $700,000. In most cases, especially in the central core of Toronto, you’re talking about at least one million bucks. Anything lesser means it’s basically craps in … Ghettos.
GTA homes’ price spike is really a tale of two markets
George Carras: Averaging the prices of different housing styles can cloud the real picture
The average price of a new home in the GTA at the end of August was $547,864. Three years ago the average price of a new home was $457,367. That represents a difference of more than $90,000 — or a dramatic 20 per cent increase — in just 36 months.
Many market watchers might regard such a sharp price spike as clear evidence that the GTA housing market is overheating and approaching bubble territory.
They would do well to exercise a bit of caution here.
Average price data can play a role in helping us to understand the housing market. But averaging out the price of highrise homes (apartments, lofts, stacked townhouses) along with lowrise homes (detached, semi-detached, townhouses and links) is a pointless exercise, particularly since the mix of housing types in the GTA has been shifting away from lowrise homes and toward highrise.
Both lowrise and highrise markets have felt the impact of low interest rates and more strict mortgage rules in the past three years. But provincial growth policies introduced in the mid-2000s — which called for the region to grow up and not out — have caused the supply of traditional lowrise homes to decline and prompted the supply of highrise homes to increase.
So, using average pricing as a means of assessing the state of the overall housing market is not exact. It is akin to trying to understand the transportation market by averaging the price of motorcycles and cars during a time period in which government-imposed policies spurred a shift away from car production and instead toward motorcycles.
To gain a better understanding of housing market trends over the past three years, it would be more effective to look at the average prices for lowrise and highrise homes separately.
In that period, the average highrise price remained relatively flat, increasing by only three per cent, to $436,789. By comparison, lowrise home prices increased by 35 per cent over those three years, hitting a new record high price of $658,938.
In other words, the GTA housing story is effectively a tale of two markets, with the basic laws of supply and demand at play.
The price of the home types we are making more of (highrise) has been flattening, while the price of the home types we’re making fewer of (lowrise) is rising.
George Carras is the president of RealNet Canada Inc. His column appears in New in Homes & Condos the last Saturday of every month. For more information, visit realnet.ca or follow on Twitter at @realnet_canada.
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