Shortly after the Ontario government introduced legislation designed to curb foreign real estate buyers and real estate speculation, the Toronto Real Estate Board undertook a data analysis exercise to understand just how many foreign buyers there are in Toronto and the GTA, and just how much real estate speculation is really going on in this area. (more…)Read more
The first quarter of 2017 has started off on a strong note in the Toronto and GTA real estate market. According to the Toronto Real Estate Board (TREB), both sales activity and average prices have both risen from its 2016 numbers. Despite a rise in sales, supply problems continue to plague Toronto and the GTA. Demand for housing is expected to grow for the rest of the year, especially from first-time buyers.
January 2017 – New year, same supply problems
The beginning of 2017 continued where the previous year left off – sales activity saw an 11.8% rise over the previous year, with 5,188 transactions compared to 4,640 in 2016. This rise was particularly strong for condominiums and apartments, and less so for low-rise homes.
Supply continued to be a problem within Toronto and the GTA, with new listings seeing a significant drop from 2016. January’s new listings were down 17.6% from January 2016’s numbers. Demand for housing is expected to continue to grow significantly, but it is feared that many prospective owners will struggle to find homes that meet their needs.
February 2017 – GTA households see home ownership as a long-term investment
Sales continued to rise in February, seeing a 5.7% year-over-year increase with 8,014 sales compared in 7,583 in 2016. Low supply numbers have led to a significant increase in sales price, with the average price rising by 27.7% year-over-year.
Demand for housing continued to rise throughout February, unmatched by the falling supply – 2017 experienced a drop of 12.5% for new listings. This phenomenon most likely means that current Toronto and GTA homeowners see owning real estate as a worthy long-term investment. According to a recent survey, TREB saw an even split in first-time buyers and current homeowners looking to purchase real estate in 2017 – meaning demand for Toronto and GTA real estate continues to grow for all types of housing.
March 2017 – New listings up amidst potential policy shakeups
March saw TREB urge against a new provincial tax on foreign buyers of real estate in Ontario, as the Board thinks it would not address the supply shortage currently facing Toronto and the GTA. The supply of Toronto area real estate has reached a 15-year low in 2017, and TREB has pledged to continue providing in-depth analysis on the issue.
Sales once again rose in the month of March, this time growing by 17.7% year-over-year. After a disappointing drop in new listings during the first two months of the year, March saw a much needed 15.2% rise in new listings. This doesn’t mean that the market is out of the woods yet, as the new listings growth is still lower than needed to compete with the sales growth numbers.
All in all, the first quarter of 2017 has proven that the real estate supply problem facing Toronto and the GTA is continuing to grow, which continues the trend of raising real estate prices.
Upward pressure on price due to dwindling demand continues to be the story of Toronto real estate in 2016, according to the Toronto Real Estate Board’s (TREB) Market Watch. (more…)Read more
With the new mortgage rules which effectively knock down the price of entry to the real estate market for first home buyers or home buyers on a limited budget, it isn’t surprising that condominiums saw the highest growth rates of any property type in October.
The Toronto Real Estate Board’s October Market Watch was full of more of the same, with 11.5% growth in year-over-year number of transactions across Toronto and the GTA. The only difference was that this growth was mostly fueled by condo sales.
Condo sales in GTA are exploding
The number of condominium sales in the Greater Toronto Area increased by 28.3% year over year, while Toronto condos clocked in at a 19.8% increase. This can be explained in a very simple way – if you are priced out of the detached or semi-detached home market, you are likely going to purchase a condominium in Toronto if you can afford it, and in the GTA if you can’t. The average price for a Toronto condo is $100,000 more than the average price of a condo in the GTA – a significant and palpable difference to a first-time or tight budget buyer. At an average price of around $359,000, a GTA condo is the last bastion of affordability in the area market for a buyer with a single income.
Rates of price growth skyrocketing due to lack of supply
Despite the explosion of condo sales, if we go by the rate of price growth, detached homes are still the most desirable commodity in the local real estate market. Condos only went up by 12.5% in October, while detached homes went up by 25.8%.
Jason Mercer, Director of Market Analysis for TREB, explained the phenomenon. “Until we experience sustained relief in the supply of listings, the potential for strong annual rates of price growth will persist, especially in the low-rise market segments.”
Detached homes are bound to face a continued lack of supply because it is more profitable for a builder to build a condominium building than a detached or semi-detached home in the current hot market, especially where land is at a premium in Toronto.
Is the foreign buyer tax in Vancouver driving sales in Toronto?
Although the TREB had promised a review of this to come later in 2016, we haven’t seen it yet. It will be up to the TREB to determine if correlation is the same as causation in the matter of Vancouver home prices plunging while Toronto home prices increased in October, although it’s hard to imagine that the Vancouver foreign buyer tax is having no impact at all given the sharp contrasts between the increases and decreases – Vancouver’s overall home sales slid by 38.8% in October. This could also be a result of the new mortgage rules making new properties in Vancouver officially unaffordable to those with an average middle-class income, especially since prices in Vancouver are higher across all property types.
How the new mortgage rules factor in
Realistically, the new mortgage rules only affect first time homebuyers or buyers on a limited budget, as stated above. While they were touted as a means to cool the hot housing market – which they may have done in Vancouver – in Toronto they seem to be driving these buyers into condominiums. Those at the upper end of the market who can afford a detached or semi-detached home in the area will be largely unaffected by these mortgage rules, and this could be why home prices continue to appreciate in the detached and semi-detached categories at a high rate.Read more
September’s Toronto and GTA real estate market continued upward trends both in price and number of sales, with double-digit gains happening on price and sales in nearly every category.
Also on-trend were the categories where significant gains were not realized. Detached and semi-detached home sales in Toronto posted a 4.7% increase and a -3.5% decrease respectively. The Toronto Real Estate Board said that this was due to a lack of inventory in these areas.
TREB President Larry Cerqua said “We continued to see strong demand for ownership housing up against a short supply of listings in the Greater Toronto Area in September. The sustained lack of inventory in many neighbourhoods across the GTA continued to underpin high rates of price growth for all home types.”
Keeping an eye on new mortgage rules, but inventory is the issue
Average selling price across the board was up by 20.4% year over year – the average price of any type of property is now $755,755. Recently announced rules for mortgages were announced go into effect October 2016, and while the TREB is keeping a watchful eye, it maintains that a lack of inventory is the key driver in the upward pressure on home prices.
The new mortgage rules impose a “stress test”, which measures a mortgage applicant’s financial qualifications not against current market rates, but against a higher five-year rate. While these rules were already in place with applicants with a smaller down payment, the federal Government imposed these rules on all new applicants in an attempt to cool the red-hot housing market and insulate the market – and homebuyers – against potential interest rate hikes.
Where new mortgage rules may impact
The new rules may not reduce the demand for pricier detached and semi-detached homes in properties in the 416 area code due to the need for a significant salary and down payment to gain entry to one of these properties. However, it is hard to believe that the new rules won’t put pressure on the lower end of the market, specifically any townhomes and condo properties across the region, and some semi-detached homes in the 905. Younger families may have to start out in a condo or townhouse rather than starting off in a family-sized home. Young professionals may have to rent a little longer, or draw on the bank of Mom & Dad to either purchase a property or live at home for longer than usual.
While it is true that these new rules were introduced to safeguard the future financial wellbeing of those on the lower rungs of the property ladder, it will mean that some may not even be able to climb up on the first rung – which is frustrating both for potential first-time homebuyers and the real estate market. It may force downward pressure on prices at the lower end of the market so sellers can meet the needs of the demographic they were hoping to sell to, but only time will tell.
You can download the September TREB Market Watch here.Read more
Real estate in the Greater Toronto Area and Toronto continued to appreciate in terms of price and number of units sold in August 2016, according to the Toronto Real Estate Board (TREB). The amount of properties sold increased year-over-year by 13%, while the average home price increased to $710,410, a huge 17.7% increase. This is on-trend for the year, with consistently increasing prices and a dwindling supply of properties. The average price of a detached home in Toronto is now well over a million, at $1,206,637.
“Population in the GTA continues to grow. The resulting growth in households coupled with favourable economic conditions and low borrowing costs means that we remain on track for another record year for home sales. Against this backdrop, TREB will also be releasing new third-party research, and consumer and REALTOR® survey results throughout the fall and winter, with discussions focusing on foreign buying activity and issues affecting the supply of ownership housing,” said Jason Mercer, TREB’s Director of Market Analysis.
There are three sure factors that are combining to create this perfect storm of increases – increased population, low borrowing costs and a limited supply of new properties on the market.
Mercer also mentioned a forthcoming analysis of another potential factor, which is demand from buyers who would have purchased properties in British Columbia, but are now being hit by the punitive foreign ownership tax for doing so. The assumption is that these buyers are now looking seriously at purchasing instead in Toronto, but that theory remains to be proved in the TREB’s upcoming report due in the last quarter of 2016.
What does the GTA look like?
Unsurprisingly, housing costs rising into the stratosphere in Toronto are driving buyers into the suburbs. Condos, townhomes and detached homes in the 905 have gone up in sales numbers between 24% and 26.8%. Condominiums in the GTA have only seen a modest price increase of 9.2%, making them much more attractive to first-time buyers and people with middle-class incomes.
The TREB has been beating the refrain that increased supply of properties on the market are a partial solution to the problem of rising housing costs – but realistically it will take some time for new units to be built. Additionally, many homeowners may be hanging on to homes as the price increases year-over-year have made any investment in real estate in the last five years attractive; they are not incented to sell when it doesn’t look like prices are going down any time soon, which further restricts inventories.
Be prepared for housing costs and sales to continue their upwards trend for the rest of 2016 – the only thing that could realistically stop this is a sudden increase in interest rates, which the Bank of Canada is not signalling as a possibility before the end of 2016.
Image Credit: Steve Brown & John Ver, Flickr
It’s been a winning streak for the entire year of 2016 for the Toronto real estate market. As we slide into the last part of the year, concerns are rising significantly about the lack of supply of detached and semi-detached homes in the downtown and GTA markets, and the potential blowback on Toronto real estate supply and prices from Vancouver’s newly introduced real estate tax for foreign buyers.
July by the numbers in Toronto real estate
Total number of listings sold in Toronto in July was just short of 10,000 – 9,989. With the lack of supply in the detached and semi-detached property types, it may have been quite a bit more. Sales of all low-rise property types were in the negative percentages in the 416 area code (detached, semi-detached and townhouse), mostly due to a lack of supply.
The lack of supply, as every student learns in a basic economics class, drives up price. In the case of a detached home in the 416 area code, the average price has now blown far past $1 million to $1,202,753. An actual headline for a recent article was “What $1 Million Can Get You in Moss Park”, as if $1 million was a low entry point.
Is the B.C. foreign buyer’s tax forcing real estate buyers to Toronto?
While some media outlets have expressed alarm about the B.C. foreign buyers tax driving foreign buyers to Toronto, their influence is not likely to be swaying the needle one way or the other. Foreign buyers have always been present in Toronto, and while their numbers may increase slightly, it isn’t likely that their presence will sway the market one way or the other. Additionally, a foreign buyer’s tax is a punitive measure which focuses on the wrong area of the market, and makes new immigrants and foreigners feel unwelcome in our country and our economy. It is a shortsighted economic measure that borders on racism.
The area of the market which requires the intervention of government, according to the Toronto Real Estate Board (TREB), is as follows:
“Unfortunately, listings for single-detached and semi-detached houses and townhouses continue to be in short supply. The result has been an increase in pent-up demand and annual rates of price increases well above the rate of inflation. Housing policy is now top of mind for all levels of government. Policy makers need to be focusing on solutions to the sustained lack of low-rise inventory throughout the GTA.”
There are many measures which government can take to increase low-rise inventory. Tax incentives for builders, tax credits for owners of such properties who need to renovate in order to sell, and much more.
It’s the same old song and dance in Toronto real estate as it has been since the beginning of 2016 – the number of transactions is up, the average house price is up, and the supply of listings is down. Due to this continuing trend, we are in a seller’s market for anyone thinking of listing a home in the Greater Toronto area or within Toronto itself.
Condos everywhere are heating up
Due to the price increase on and lack of supply of detached and semi-detached homes, buyers are turning to condos en masse. Sales were up of condos in the GTA by 18%, while Toronto condos saw a 15% increase. The biggest increase of price segmented by type of property came in at a huge 21% for a detached home in the Greater Toronto Area.
Toronto Real Esate Board taking action
The Toronto Real Estate Board President, Larry Cerqua, stated that the TREB would be taking steps to help to increase the supply of listings in the long term.
“As the federal, provincial and local levels of government discuss housing policy in the coming months, issues affecting the lack of supply in the GTA should be of paramount importance. TREB will be undertaking, and making public, results of additional research in the second half of 2016, with the goal of proactively adding to the housing policy discussion.”
While Cerqua did not specifically say how the research was structured, items that could contribute to increased supply that the government could offer are:
-Scaling back or preventing expansion of area greenbelts
-Offering additional tax incentives for new builds
-Improved land-use and land-supply rules
-Increased infrastructure spending to service new housing areas
-Reduced development charges
You can read the TREB June Market Watch here.Read more
The GTA and Toronto real estate market is continuing its upward trend, according the Toronto Real Estate Board’s Market Watch for May 2016. Both total number of home sales and prices are up across the board.
The big news – 15% overall increase in home prices
The MLS® Home Price Index Composite Benchmark was up over May 2015 by 15%. The MLS Home Price Index is a set of software tools that provides indices on markets in various areas across Canada, and is the most accurate indicator of home price data in Canada. Overall transactions were also up by 10.6% year-over-year in May 2016.
Average prices were up across the board on every property type, with the largest increases being in detached homes in both Toronto and the GTA, represented by the 905 area code on the above chart. The GTA saw the largest increases in home prices in all categories.
The real story is the shortage of inventory
According to the President of the Toronto Real Estate Board, Mark McLean, the story these numbers tell is about the dwindling supply of homes under the Toronto Real Estate Board’s jurisdiction.
“While the record number of home sales through the first five months of 2016 is not necessarily surprising, it does sometimes mask the larger story in the GTA: the shortage of listings, which has resulted in strong upward pressure on home prices.”
While builders are incentivized by the steady upswing in home prices as the result of a lack of supply, they may meet future roadblocks with the Province of Ontario’s plan to expand the Greenbelt, which would minimize areas for new builds in the GTA.
Condominiums see higher price inflation than usual
As supply of the generally more desirable low-rise homes decreases and their price increases, many buyers in both downtown and the 905 area are looking more seriously at condominiums. Jason Mercer, the Toronto Real Estate Board’s Director of Market Analysis, notes in May’s Market Watch that the price growth of condominiums is “well above the rate of inflation.”Read more