Every once in a while, a buyer will ask us the best type of property to buy. Or the best area.
“I’ve heard that detached homes go up in value the most…” or “The news said that condos are the hot commodity this year… is it true?”
First off, we really suggest you buy for your own needs first and foremost. But it is useful to know the facts.
When buying a property, it’s always good to look at trends. Wayne Gretzky had a great quote that said, “I skate to where the puck is going to be, not where it has been.”
What it looked like in 2011
Have a look at this chart from a 2011 Canadian Mortgage and Housing Corporation (CMHC) presentation we attended many years ago. It shows that detached homes were the fastest appreciating properties in the Greater Toronto Area (GTA).
All of the properties are subject to similar market fluctuations up and down, and you can see the apartment, row (townhouses) and semi-detached were all increasing at similar rates. But if you were going to pick a “horse” in this race, it’s the single detached properties.
Now, let’s fast forward to 2019
We’ve had the stress-test implemented, and prices have almost DOUBLED compared to those 2011 numbers, as you’ll see below.
The numbers, and the trends, have changed dramatically in 2019.
Have a look at these graphs, and pay particular attention to the slope of the increases after Q1 2018, when the stress test was implemented.
The median sale price for single detached homes was little changed, up only 0.9% on a year-over-year basis to $875,000 in the second quarter of 2019.
The median sale price for semi-detached units was up 4.6% on a year-over-year basis to $743,500 in the second quarter of 2019.
The median sale price for condominium apartment units was up 6.7% on a year-over-year basis to $525,000 in the second quarter of 2019. This was a new record for the median sale price of condominium apartment properties.
So just to be clear…
Detached homes in the last year barely increased. Semi-detached did reasonably well. And condo apartments beat both of them by a pretty wide margin – combined!
Also worth noting… in 2019, condo prices are now at the same price point as a 2011 single detached home in the GTA.
The combination of the stress test with reduced affordability (prices are increasing faster than salaries) and the Province of Ontario’s “Places to Grow Act” has caused a shift towards condos being the big winner when it comes to median price increases.
In 2019, this is the reality of the market.
We first noticed this when we saw Milton “growing up” with a huge number of high-rise construction projects in development back in 2018.
You can read more about that here.
It’s not expected that these trends will change anytime soon. If you’re buying a detached home, it’s probably going to be a long-term move. Your percentage increase may not be as high, but your actual dollar-for-dollar return on your investment could be the same as a lower-priced condo.
It’s quite possible that both properties end up increasing by $50,000 in the same time period… it just looks like less as a percentage change for the detached home with a larger price tag.
So buy based on your needs, and see the big picture that smaller and smaller properties will continue to be the most popular options for buyers in the future, particularly for the large wave of millenials and downsizing Baby Boomers in the next 5-10 years.
Detached homes will still be in demand, but it’s possible that demand will be reduced in the upcoming years and prices could remain flat.