Fewer deep-pocketed Toronto buyers, but so much demand there’s talk of “burnout.”
The London-area’s booming housing market shows no signs of cooling off, with the number of new single-detached homes begun last month the highest number for July in a decade.
Single-family homes are leading the construction frenzy, boosted by a surge in demand for upscale resale homes — often going to monied Toronto buyers cashing out there — that have convinced more people in that segment of the market to build new rather than compete for existing homes.
A more manageable pace, with fewer customers from the Greater Toronto Area (GTA), isn’t a bad thing, given the stresses on the system, said the head of the London Home Builders’ Association.
“There’s a fear of burnout. There’s such a demand. Everyone gets crazy . . . Everybody wants everything now, but they don’t realize that everything is interlaced,” said Peter Madsen, the association’s president.
The Canada Mortgage and Housing Corp. reports 197 single-detached homes were begun in July, the highest level for the month in 10 years. There were 38 multi-family starts, down slightly from 41 in July 2016.
The CMHC said the area home-building market is getting a major boost from the resale market, which is racking up record sales this year, especially in homes priced at more than $500,000.
So far this year, 723 homes have sold for more than half a million dollars, compared to 268 in the same seven-month period last year.
“The price gap between single-detached homes in London and comparable homes in Toronto has continued to remain wide, making London an attractive destination for buyers from the Greater Toronto Area,” the agency said.
Those high-priced homes are often sold to buyers who cash out and move in from the Toronto area, where the average of a single-detached home is more than $1 million, said Jim Smith, president of the London St. Thomas Association of Realtors.
Madsen said while the surge in new housing is welcome, there’s strain on the system.
“It seems like there is a shortage of everyone we need to keep up the supply of homes,” he said.
Contractors are working with the city to get make more serviced lots available and also scrambling to find skilled labour.
Madsen said there’s also a heavy workload for municipal staff handling building permits and inspections.
He said there are signs the influx of GTA buyers who drove up demand in the spring is starting to subside. The Toronto market has been in full retreat in the last few months, with a drop in sales and prices.
To the end of July there have been 2,183 housing starts in London-St. Thomas. The record for annual starts is 3,673, set in 2006.
A surge in the multi-family sector will likely ensure the record is broken this year.
The city just issued a building permit for Tricar Group’s new 130-unit luxury condo building in Byron, and officials with the building department said permits for several other large apartment buildings will likely be issued before the end of the year.
Madsen said he expects a robust market for the rest of the year.
“This year will be a very cool story. I will be shocked if it slowed down.”
Across Canada the CMHC’s annualized estimate of housing starts rose to 222,300 in July, the second-strongest reading of the past year.