Faced with higher interest rates and tougher mortgage qualification rules, many Canadians have turned to the new condo market as a more affordable shot at homeownership. One property type that hasn’t been as attractive? Townhouses.
According to a new report from real estate company Altus Group, new townhouse sales fell in both Toronto and Vancouver in the first half of 2018.
“In the Greater Toronto Area, new townhouse sales have plummeted in the past 2 years – both in absolute terms and as percentage of total new home sales (to just 7 percent of the total in the first half of 2018),” reads the report.
There were just 885 new GTA townhouses sold in the first half of 2018, down from 2,522 during the same period in 2017. Similarly, there were 1,867 Vancouver new townhouses sold in the first half of 2018, down from 2,604 in 2016.
Altus cites deteriorating housing affordability, including higher interest and mortgage rates, as a reason for the drop in sales. But the report is also optimistic that demand for the property type will begin to turn around in the coming year.
“Townhouses are an attractive product for younger families. While many Millennials have delayed forming families and buying homes, there is pent-up ownership demand forming,” reads the report.
It goes on to say that, while townhouses are more expensive than many new condos, they are still more affordable than single or semi-detached homes, making them more attractive to first-time buyers.
“This, along with policies aimed at increasing densities for greenfield areas, and the growing number of baby boomer retirees looking for move-down product, suggest new townhouse sales are poised growth in the years ahead,” concludes the report.
What’s more, mid-density land transactions are up in several markets, including the GTA. There were 750 acres traded in the region for townhouse projects this year, up from 375 acres the year before.
“Altus Group data on residential land sales shows buoyant sales in most larger markets last year, on an acreage traded basis,” reads the report. “These trends could signal more townhouse projects down the road.”