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Low-rise vs. high-rise

Yesterday I sent out this tweet, which included this graph:

The chart is from Altus Group and it is a monthly price index of new low-rise vs. high-rise housing in the Greater Toronto Area (GTA). I have posted similar charts in the past, but every time this chart gets updated the spread widens and the market looks even crazier.

Some people responded on Twitter by saying that this is clearly an indication of a bubble. I don’t know if that is the case. 

But, as I have said many times before, I do believe that it tells a vivid story around supply. Low-rise housing is severely supply constrained in the GTA and high-rise housing is less so. That has helped to stabilize pricing in the latter case.

Now, you could look at this chart and say that the pace of low-rise price increases is simply unsustainable. The market must correct. 

But you could also look at it and say that the market is going through a fundamental shift whereby more and more families will start living up, as opposed to out – which should then translate into high-rise pricing trending upwards as unit sizes increase. This is where I think we are headed. 

What do you reckon is happening?

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