As detached -- and even semi-detached -- homes become increasingly unattainable in Canada thanks to dramatically climbing prices, homebuyers are turning to the next best thing: townhouses.
According to real estate data solutions company Altus Group, the pandemic has prompted buyers to embrace townhouses as a more affordable option to obtain more space to live -- and, often, to work -- in.
Altus Group has released its 2021 Townhouse Housing Report, an executive-style brief that dives into townhouse market trends across Canada, most specifically in Vancouver, Calgary, and the Greater Toronto Area (GTA). The report was based on data that includes both traditional row townhouses as well as stacked townhouses.
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“The pandemic has prompted many buyers to seek more space than available in the typical condo apartment, but at a more affordable price point than for a detached home,” reads the report.
The resonating theme is that Canadian townhouses have become incredibly hot commodities since the onset of the pandemic. And we literally can't get enough of them.
Typical facade of a modern suburban townhouse near a pond
Tellingly, Altus Group found that sales of new townhouses were up through the first three quarters of 2021 in the Vancouver, Calgary, and GTA market areas. In each of these market areas, townhouses have accounted for about one of every five new home sales in 2021 -- a significant market segment.
However, despite actual sales levels being up last year, townhouses have captured a smaller share of the total new home market, says Altus Group. The reason being is not that other types of single-family homes have usurped townhouses; townhouse sales have indeed increased by a larger degree than sales of new detached and semi-detached homes. "Rather, a strong resurgence in new condominium apartment sales is the culprit," reads the report.
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Altus Group found that the inventory of new townhouse units available to purchase has dropped dramatically over the past year in Vancouver and the GTA, while prices have been rapidly increasing. Both Vancouver and the GTA are now at only one to two months of available supply, based on average monthly sales in the past 12 months. While not as tight, Calgary townhouse inventories are also down, with months of inventory at their lowest level since 2014, according to the report.
The tight supply and strong demand has resulted in the dramatic price increases in some parts of the country. In fact, prices have been increasing more rapidly for new townhouse product in Vancouver and the GTA than for condo units. “Some deterioration in relative affordability therefore is pushing some potential townhouse demand into condominium apartments,” reads the report.
Toronto new home build/Shutterstock
Altus Group points to some potentially positive news on the condo supply front. Compared to 2020, there was increased trading of medium density residential land in most of Canada’s major markets in the first three quarters of 2021, with the exception of Alberta.
“This suggests that there is more optimism among builders/developers about the prospects for the townhouse segment of the new home market -- and that more townhouse projects may be on the way in future to help mitigate further deterioration in the supply situation,” reads the report.
According to Altus Group, stacked townhouses -- units that share a sidewall and typically have two or three units stacked vertically together -- have been taking on a larger role in the past year within the broader townhouse world. Altus Group says this momentum is bridging the size and price gap between condos and row townhouses.
Sales of new stacked townhouse units are up year-to-date in both Vancouver and the GTA, already surpassing the annual totals for 2020. Stacked townhomes account for about one in seven new townhouse sales year-to-date in Vancouver and more than one in four in the GTA. In fact, the GTA is headed for a record year for new stacked townhouse sales.
Toronto realtor Davelle Morrison says that many of the city's townhomes are actually at the same price points as its houses. "If they aren't, they are stacked townhouses," she says. And not all stacked townhouses are created equal.
"There are good and bad stacked townhouses," says Morrison. "I’m seeing a few with large special assessments for repairs. And others provide such a terrible layout that they force buyers to sell them in a few years simply because once they have children, getting a stroller past the stairs becomes problematic."
Despite the challenges of some, Morrison says that, if a Toronto buyer can find one of the better townhouses, then they really have found a gem in the city. "My buyers recently purchased a great townhouse in the city which even had a communal pool," says Morrison. "The layout is perfect and I feel as though they will be able stay there for years come even after they have their first little one."
Looking ahead, Altus Group says the underlying appeal of new townhouses to buyers who are seeking more space than is typically available in a new condo is expected to persist; however, there are a few factors that could reduce sales in 2022. This includes rapidly rising prices, high effective mortgage rates, lack of supply in markets like the GTA and Vancouver, and the ongoing uncertainty surrounding COVID-19 and its impact on the economy.
In the meantime, if you're in the market for a townhouse, you'd better get 'em while they're hot -- before prices rise and supply drops even further.
