Less than 10 months ago, the house at 145 Galley Ave. was uninhabitable. Now, it is unrecognizable.

The Roncesvalles home was so dilapidated when its elderly owner put it on the market for $649,900 last January, the MLS listing warned open-house enthusiasts to leave the kids at home: “Not for the faint of heart.”

The furnace hadn’t worked in years. The walls were grey from the soot kicked out by kerosene heaters. Windows were missing. The roof was a sieve.

Still, more than 30 folks bid on the house. It sold for $803,649 — more than $150,000 over the asking price.

It’s up for sale again — for $1.5 million.

“This is just in keeping with what’s been happening in the area,” says contractor Michael DeSimone as workers applied the finishing touches, aiming to have it ready for visitors by Dec. 1.

“Ten years ago, this Roncesvalles/Parkdale area was in need of revitalization. These things help in that,” he says, glancing at the stunning transformation.

An unprecedented renovation/restoration/rejuvenation binge is sweeping the streets of the old City of Toronto and having a significant impact on overall house prices, which were yet again up, this time almost nine per cent, across the GTA in October, year over year.

Last April, for instance, a surge of new infill homes in the 416 region was enough to briefly skew the average mid-month sale price of detached homes in the City of Toronto to an unprecedented $1 million. That average has since settled back down to $950,000.

This renovation and rebuilding boom is fuelled by what James McKellar, director of the real estate and infrastructure program at York University’s Schulich School of Business, calls “a major structural shift in the consumer market for housing.”

The desire to live downtown — thanks to worsening commutes, the 2006 provincial crackdown on urban sprawl and a generation of young people keen to live close to the core — is turning Toronto’s single-family home market upside-down.

While condo prices have largely been kept in check by increasing supply, price pressure is only increasing in Toronto’s single-family house market as more folks look to replicate the modern comforts of suburban homes in city neighbourhoods where there’s almost no room left.

“The problem in the single-family market is that the vast majority of Toronto houses were built upwards of a century ago and they have come to the point where the only real value is in the land,” says McKellar.

“What we’re going through now is a regeneration of the city, which may be affecting affordability, but where the benefits far outstrip the negatives.”

The Galley Ave. home is a prime example.

What was just a 2 ½-storey house like many of its neighbours back in January — with treacherously steep stairs to the low-ceilinged top floor — is now a three-storey modernist showcase with what its realtor/owner, Paolo Castellano, boasts is a treetop “master retreat.”

“This Modern, Bright Detached Galley Ave. Dream Home was Reno’d Top to Bottom And Now Has Brand New Everything!!” the MLS listing shouts.

Gone are the classic red brick façade and enclosed front porch that made it look right at home on this stretch of century-old grand dames, just steps from now sought-after Roncesvalles Ave. Cedar stripping has replaced unsightly, peeling paint.

The kitchen, which was such a health hazard that it caused some open-house visitors to gasp, is now a custom-built model of German efficiency.

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The place was gutted to its solid brick walls. The roof was raised and the basement was lowered, adding hundreds more feet of livable — and pricey — space. (Castellano refused to allow a tour and has let only a handful of keen potential buyers into what he calls “the construction site.”)

And since even two bathrooms are barely enough for today’s discerning buyer, the house now has four, including a master ensuite.

“This isn’t one of those patch jobs where … you put on lipstick. This house has been completely redone,” says Castellano, adding that more than $400,000 went into the home.

Realtor John Pasalis has watched the rebuilding boom sweep whole pockets of the city, making the postwar bungalow an endangered species in areas like East York and Scarborough’s Hunt Club area near Kingston and Birchmount Rds.

These new builds have a domino effect, turning affordable areas like Leslieville into new urban hot spots where everyone feels the heat: A $650,000 home that is flipped post-reno for $1.1 million becomes the new comparable for every future home that goes up for sale, and also drives up area taxes.

But they are going to remain a major force in Toronto’s single-family home market, even as they continue to decimate the supply of more affordable housing.

“What’s driving a lot of this is people’s desire to live in the city, but they want some of the same amenities as in the suburbs. East York bungalows just aren’t practical by today’s standards, even for a couple,” says Pasalis.

“Builders have to build these houses to cater to that demand.”

Burlington-based real estate consultant Ross Kay worries that city officials haven’t thought through the implications of okaying rebuilds with whole new floors or massive additions that are actually changing the character of streets.

“The City of Toronto is decreasing affordability across all of Toronto because of the trickle-down effect caused by seemingly innocent decisions they are making around infills and renovations,” says Kay.

He argues that the city has the power through its building permit approval process to limit the scope of rebuilding and focus more, instead, on encouraging multiple houses, where possible, on single-home building sites. Creating two semis, rather than one $2 million mega-home, would open the door to more first-time buyers, he argues.

Professor McKellar knows that argument well. A developer is now facing stiff community opposition in McKellar’s Midtown neighbourhood for seeking to raze two bungalows and replace them with four townhomes.

Approval is almost inevitable, says McKellar, given the province’s Places to Grow legislation, passed in 2006, that makes intensification a top priority, with some 40 per cent of all new growth aimed at infill sites.

“It would be silly for the city to step in and say, ‘We want Toronto to look just like it did in the 1940s.’ People have said: ‘We don’t want to live like this any more, in little bungalows with tiny closets.’ ”

The bigger issue is that Toronto’s zoning bylaws, dating back to the 1950s, are desperately in need of an update. That’s lead to what McKellar calls a sort of “let’s-make-a-deal” juggling of developers’ demands and homeowners’ wants.

“What the city needs to do is be clear on what qualities of each neighbourhood it wants to maintain.”