For the first time, the Building Industry and Land Development Association (BILD), RealNet Canada, and the Toronto Real Estate Board (TREB) assembled to present an overall view of the GTA housing market.
The panel consisted of: Steve Deveaux, Chair, BILD; Mark McLean, President, TREB; George Carras, Founder, RealNet Canada Inc. (an Altus Group company) and President, RealStrategies Inc.; Jason Mercer, Director of Market Analysis, TREB; Bryan Tuckey, President and CEO, BILD; and John DiMichele, Chief Executive Officer, TREB.
The main three points discussed at the presentation were how supply and demand is shaping prices, the lack of affordability across the regions, and the role of the government in the physical growth of our cities and towns.
Strong demand for new and resale housing in the GTA
As of October 2015, there have been 124,123 home sales in the GTA, about three quarters of which were through the MLS system. With two months remaining of 2015, that year-to-date (YTD) figure is greater than the total sales recorded in 2014.
The high amount of sales is proof enough that there is a strong demand for new and resale housing in the GTA; the issue is that supply can’t keep up. As of the end of October 2015, there were only 4,980 new low-rise home available to purchase. 15 years ago, there were 17,445 new low-rise homes on the market. High-rise inventory has remained steady and is actually on the rise, with 21,408 units.
The lack of affordability in the GTA housing market
The low supply in the new low-rise market has a direct correlation with the rapidly rising prices. Ever since 2009 when inventory fell, the new home price index has continued on a steep upturn. As of the end of October, the average price for a new low-rise home was $802,376, compared to $387,369 a decade ago.
The resale market has seen the exact correlation between lower inventories and higher prices. In the last 10 years, the resale market’s inventory of low-rise homes has been cut in half, and average prices have nearly doubled.
“As an industry we continue to find innovative ways to provide a range of housing choices,” said Deveaux. “But it is becoming increasingly challenging to design, build and sell the homes that many people – especially first-time buyers – want to and can afford to purchase.”
The average price of a new detached home in the GTA was $962,312. “To comfortably afford that home with a 20% down payment, the buyer would need an annual income of $174,854,” Deveaux added. “With a smaller down payment, the required income would be even higher. According to Statistics Canada, the average total family income in the Toronto area in 2013 was $107,200.”
High-rise prices in both the new and resale housing markets has increased steadily over the last decade. The average price of a new high-rise unit was $440,382 in October, and $331,400 for a resale unit.
Carras presented an interesting chart comparing a new home from October 2005 to what you can get now for the same money and how much that home would cost today. The example he used was a two-storey, four-bedroom, 2,491 square foot detached home on a 40’ lot in Richmond Hill, priced at $430,918 in 2005.
Today, a home of similar size, style and location averages about $1,179,990, and if you want to only spend $430,000, then you’re looking at a three-bedroom, 1,629 square foot townhome on a 20’ lot in Whitby.
Carras presented the same comparison for the high-rise market. The example from 2005 was a one-bedroom, 979 square foot unit in the west end of downtown Toronto, priced at $349,900. Today, that unit would cost about $644,900, and if you want to pay 2005 prices, you’re getting a 623 square foot, one+den.
Another sign of an affordability issue the widening price gap between high-rise and low-rise units. For the resale market, the price gap between low-rise and high-rise was $338,000 as of the end of October. The new home market has an even wider gap of $361,994.
What can the different levels of government do to improve the housing market?
In a way, the fate of the GTA’s housing market lies in the hands of the different levels of government (like everything else we suppose).
A potential extra land transfer tax, rising development charges, property taxes, Greenbelt boundaries, outdated zoning, a less than smooth approval process across municipalities…it all adds up to more expensive housing for homebuyers.
“Homebuyers in the GTA presently benefit from a diversity of new and existing home options that are affordable at different income levels,” McLean said. “Sadly, the provincial government seems bent on hampering home ownership affordability. Studies have shown that municipal land transfer taxes will have a negative impact across Ontario, not only from an affordability perspective, but also by undermining our economy and costing thousands of jobs.”
What’s the solution? There weren’t any presented, but we didn’t go in expecting any concrete answers. The GTA is growing quickly and merging with other parts of the Greater Golden Horseshoe. What we need is a new plan for growth, and educating the public about what is needed is the first step to implementing a new vision for housing throughout Southern Ontario.