Housing lot sizes continue to shrink. There are many attractions of suburban houses, but one of the key selling points was that as you move out of the city you will get more land and more backyard. Think again. That metric is under stress in Canada’s most populous region, and new buyers are finding that the average lot size is shrinking.
For single-family detached homes, the average lot size offered by Greater Toronto Area builders was in the average range of 40 to 41 foot lots over the past five years. But in 2020, that number dipped sharply – to 37 feet on average – and the average of all ground housing frontages (which includes townhouses and detached homes) dropped from 29 feet in 2019 to 25 feet in 2020.
The frontage number can be misleading, because for decades it assumed the average lot depth might be 100 feet at least. But in recent years some builders, led by Canadian mega builder Mattamy Homes, have innovated on lot shape by shrinking that depth to 70 or 80 feet, while keeping a more standard frontage. These stubby lots can pack in more housing on a given land parcel, while maintaining the curb appeal of more spacious developments.
Ontario’s 2006 growth plan helped raise prices for raw and developable land, but other pressures have also raised the costs of building the actual homes. One example pulled out of MCAP’s data shows two phases of a North York detached development, the first one in 2015 and the second one selling in 2020. The price per house on generous, 45 foot and larger frontage lots jumped from $1.68 million in 2015 to $2.76 million in 2020. But at the same time, the costs to service the lots nearly doubled, from $737,000 to $1.4 million; the hard construction costs on each house went up close to $100,000; the HST bill almost doubled; and the soft costs (sales/broker commissions; marketing/sales office and maintenance, architects, design, and other consultants, construction loan interest and fees) went up $135,000.
The result was that even though the 2020 house sold for $1 million more, the 2015 profit of $164,250 was virtually the same as in 2020, at $166,650. The rising costs of doing business for the same profits could explain why there were more than 11,000 ground-related houses launched for sale in 2015 and 2020 will end with only 5,200 units.
