A banner year for new home sales has made a tight supply in the Greater Toronto Area even tighter.
According to sales data released Wednesday by the Building and Land Developent Association (BILD), 37,669 new homes were sold across the GTA in 2020, up 5 per cent from 2019, and two per cent above the 10-year average.
The booming sales, combined with COVID-19-related restrictions which have slowed construction, means supplies of new housing are getting even tighter, says BILD president and CEO David Wilkes.
“We’ve had a shortfall for at least a decade, and this has made it much tighter. Normally, we’d have 9 to 12 months of inventory available,” Wilkes said. “But right now, it’s down to three or four months.”
Total new home remaining inventory across the GTA fell to 13,171 units in December, according to data compiled for BILD by Altus Group.
That’s the lowest it has been since March 2018.
Demand for new homes has stayed robust during the pandemic despite a recession. Wilkes argues there are two main reasons: Some people have been able to save up more money, and people working from home are looking for more space.
“People who have still been working haven’t been able to spend money on a lot of the things they normally do, so they’ve spent it on housing,” Wilkes said.
Robert Hogue, a senior economist at RBC, agreed.
“Canadians in aggregate have built up a lot of savings during the pandemic. And I think it’s fair to assume that much of it was in the higher income levels, where people are more likely to be home owners or home buyers,” said Hogue, adding there’s plenty of evidence showing higher income Canadians were less affected by the COVID-19 recession than people on the lower end of the income scale.
“The economic effects of this pandemic have been really uneven. People on lower incomes have been much more harshly affected,” Hogue said.
Some of the demand for new housing, he added, was likely driven by people upsizing their homes as they started to get a little cramped for space while working for home, sometimes at the same time as their kids are doing online learning.
“I think people have been looking at working from home and realizing that, for many of us, that’s going to become permanent so they want more space,” said Hogue, pointing out that in December, Statistics Canada said there were 2.5 million Canadians working from home who normally wouldn’t.
“Even if it becomes permanent for just 10 per cent of them, that’s still a significant number.”
At the same time as the sales boom, said Wilkes, there have been COVID-related restrictions on construction designed to slow the pandemic’s spread. While houses are still being built, it’s a much slower process, he said.
“Safety of our workers in the most important thing. But some of these safety steps mean we just can’t build as quickly. We’re only having one trade at a time on-site, for example. If you can’t have the drywall guy and the electrician in at the same time, things are going to take longer,” said Wilkes, who urged municipalities to approve new projects which are still in the pipeline.
“We really need the approvals so the supply doesn’t get even tighter,” Wilkes said.
If there was one downside in the BILD numbers, it was in sales of new condos. Statistics showed 20,696 new condo units were sold across the GTA last year, a drop of 22 per cent from 2019.
RBC’s Hogue argued that’s likely because there were fewer students and new Canadians in the GTA during the pandemic.
That, Hogue says, led to a slump in demand for rentals of existing condos, in turn making new ones less attractive.
“A large part of the presale condo market is investors. And when there’s already so much existing supply on the market, buying a new one doesn’t look like such a good investment. But I don’t think that’s a permanent situation.”