A human heart, the beat of life, speeds during times of activity and slows during times of rest before picking right back up again. Like a heart, the housing market has a pulse. During active times the pulse speeds-up and we experience strong sales levels. However, the market not unlike the pulsing of a heart as it too fluctuates and it is this scenario which perhaps best describes our current market environment.

Let’s begin by reviewing the new home, low-rise and high-rise markets - year over year (August 2006 to that of August 2005). With the exception of the Municipality of Halton, all regions lagged behind in terms of sales compared to one year ago.  In the August 2005 Low-Rise report released by RealNet, 2005 sales for the month were only marginally higher than the previous year which was stated to be at a 5 year low. This year low rise sales have not fared much better. In fact, sales in August 2006 were down fourteen (14%) percent from last year.  The beat or pulse of the low-rise market is indeed slowing.  What is the cause of this? One can certainly point to the relative increase in home prices as the root cause.  Looking at RealNet’s Price Index over the past 5 years it is clear that prices have increased an accelerating rate.   The rate of increase in August between years 2005 to 2006 was around 2% for an average of $394,954.  A $400,000 average price for new home low-rise product would once have been imagined as a reachable mark. Economics 101 - the law of supply and demand, it becomes clear that with the availability of serviced land diminishing the low-rise market has and continues to experience tremendous price pressures.  As the price threshold of low-rise housing in all municipalities across the GTA rises consumers are turning to alternative housing forms which present them with more affordable options - the choice has been a condominium apartment or some other higher density housing form (i.e. stacked, back to back town).

 In 2005, the high-rise market experienced a 31% increase in sales activity over the previous year, moving from 13,480 sales to 17,693.  However, of greater importance when viewing the market place is the fact that the proportionate share of apartment activity moved from 33% in 2004 to 42% in 2005.  Through the first nine months of 2006 (Jan-Aug) high-rise sales are at 12,480, that are 2% higher than the previous year while the share of apartment sales in the market is at 45% - virtually a 50/50 split between low and high rise product, who would have foreseen a time when the sale of apartments would equal all other housing types.  The strength being experienced in the high-rise sector has even caused traditional low-rise builders to shift their focus to this market.  Tribute Communities, Aspen Ridge Homes and Greenpark Homes are top 10 low-rise builders who have ventured into the condominium apartment game.

Where will the market go from here? will apartment activity continue to escalate?, what impact is the resale environment having on new homes?  These are some of the topics which we will explore in upcoming issues.