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Tony Nicholl’s three-person family lives in a townhouse in Dundas, Ont. ‘I can’t afford to buy an actual house,’ he says. (Glenn Lowson for The Globe and Mail)
Tony Nicholl’s three-person family lives in a townhouse in Dundas, Ont. ‘I can’t afford to buy an actual house,’ he says. (Glenn Lowson for The Globe and Mail)

REAL ESTATE

Paying more for less: Canada’s shrinking living room Add to ...

When it comes to housing, Canadians are paying more for less.

That’s due in part to the shifting structure of the country’s most expensive markets, Toronto and Vancouver, where more households are now living in high-rise buildings. The stock of condos is growing and the average size of new units is shrinking.

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Even as average national home prices rise dramatically, the average Canadian dwelling has been getting smaller – a phenomenon that’s likely skewed by the condo boom.

Census data released Wednesday by Statistics Canada show that families are becoming smaller, a trend that goes part of the way toward explaining smaller living spaces. Affordability is also an issue. But real estate experts say that the ways in which condo buildings are financed and sold are causing developers to favour smaller units, creating concern that the housing stock is changing faster than lifestyles.

From 2006 to 2011, the proportion of Vancouver’s households living in high rises grew to 14.5 per cent from 12.8 per cent, and in Toronto it rose to 27.4 per cent from 26.6 per cent, according to the new census data.

Meanwhile, the average number of members in a family is falling.

More couples are not having children, divorces are up, and 13.5 per cent of people aged 15 and up are living alone.

“The trend towards one and two-person households helps explain why new houses and condo units are being built smaller than they once were,” Toronto-Dominion Bank economist Sonya Gulati wrote in a research note. “High home and land prices and reduced home affordability also help explain why living spaces are getting smaller.”

The gap between the average size of existing condos and new condos in Toronto has been growing, with developers increasingly building smaller units because they are more affordable and more appealing to investors who want to rent them out. But some resistance to smaller units is popping up among buyers, according to research firm Urbanation Inc.

“People are becoming accustomed to living in smaller spaces,” added Barry Fenton, chief executive officer of Lanterra Developments. On Thursday, Lanterra will begin marketing its Britt condo project, on the site of Toronto’s former Sutton Place hotel, and 85 per cent of the units are between 400 and 700 square feet.

Part of the reason for the rise in small units is that they are easier to sell, and make it easier to obtain bank financing for the project, he said. “From a risk standpoint, the banks are happier having 300 purchasers buying product at 800-square-foot unit sizes than 125 purchasers buying more square footage. And there are only so many people that can afford larger-sized units.”

Affordability is also a factor when it comes to the size of detached homes. Tony Nicholl’s three-person family lives in a two-bedroom townhouse in Dundas, Ont. “In the town I live in, I can’t afford to buy an actual house,” he said. “If we have any more kids, we’ll have to get a bigger place.” That will mean moving to a less desirable area, he said.

While real estate players in Toronto say that city’s condo market is being driven by young first-time buyers, aging baby boomers across the country looking to downsize are also behind this trend.

Rob Nisbett, a broker with Re/Max Crown in Regina, said he is increasingly seeing empty-nesters move into smaller places where they don’t have to worry as much about maintenance.

Hani Lammam, vice-president of Cressey Development in Vancouver, said smaller units are outpacing larger units in the city because of affordability. But he’s beginning to see more baby boomers move into condos, and they tend to want more spacious units.

Detached houses continue to be the most common type of home in Canada. About 55 per cent of households were in them in 2011, down a touch from 55.3 per cent five years earlier.

But data from Natural Resources Canada suggest that the average size of homes being built (including detached homes and apartments) began falling after 2006 for the first time since the Second World War. While the latest data is from 2009, the decrease could mark the start of a trend.

“As the average size of apartments is usually smaller than single-family houses, the average size of the whole Canadian housing stock might be decreasing as the share of apartments is increasing,” Michelle Viau, a spokesperson for Natural Resources Canada, wrote in an e-mail.

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