The Toronto Real Estate Board (TREB) just released its monthly resale housing market figures announcing that February 2017 had more sales than last year despite 2016’s leap year. There were 8,014 sales in the Greater Toronto Area (GTA) reported through the MLS last month, which is a 5.7% year-over-year increase. And if you’re planning to buy a home in the GTA, be prepared for higher prices than last year.
“The February statistics tell me that many Greater Toronto Area households continue to view home ownership as a great long-term investment,” says TREB President Larry Cerqua. “The high demand for ownership housing we’re seeing is broad-based, with strong sales growth for most low-rise home types and condominium apartments. This makes sense given the results of a recent consumer survey undertaken for TREB by Ipsos, which found an even split between intending first-time buyers and existing homeowners who indicated that they were planning on purchasing a home in 2017.”
The survey found that a whopping 53% of prospective purchasers declared that they would be first-time buyers. This is up from 49% the previous year. In the City of Toronto, 64% said they would be first-timers, an increase from 56% the year before. It makes sense since Toronto has the most condo options and the majority of first-time buyers are buying condos.
“There has also been much speculation, both in the media and among government policymakers, about the amount of foreign buying activity in the GTA,” Cerqua says. “A recent Ipsos survey of the TREB membership on foreign buying activity suggests that the impact of foreign buyers in the GTA marketplace has been somewhat overblown. GTA-wide, the number of transactions accounted for by foreign buyers was less than 5%. Furthermore, the great majority – 80%, to be exact – of foreign buyers were purchasing a home as a primary residence, a home for another family member to live in, or as an investment to rent out to a tenant, which is helpful in a tight rental market.”
“To date, the provincial government and municipal governments have resisted the implementation of a foreign buyer tax in the absence of empirical evidence,” he adds. “The Ipsos survey of TREB Members should further solidify the argument that the solution to strong rates of price growth and related affordability concerns lies not with taxing foreign buyers more, but rather with addressing the supply of homes available for sale, or lack thereof.”
In February 2017, new listings in the GTA dropped 12.5% to 9,834. The real estate industry usually measures inventory by monthly supply (how many months it would take to run out of inventory at current sales trends if there were no new listings or new home releases), but it’s getting to the point where inventory can be measured by weeks.
“The listing supply crunch we are experiencing in the GTA has undoubtedly led to the double-digit home price increases we are now experiencing on a sustained basis, both in the low-rise and high-rise market segments,” explains Jason Mercer, TREB’s Director of Market Analysis. “Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue.”
“Over the past year, we have reached a point where government policies that target only the demand side of the market, whether we’re talking about foreign buyers or further changes to mortgage lending guidelines, will not be enough to balance market conditions and moderate the pace of price growth,” Mercer adds.
The average selling price in February 2017 went up 27.7% to $875,983. Double digit gains were seen across the board. Detached homes in the 416 were selling for $1,573,622 on average, which is a 29.8% increase compared to last year. In the 905, the price growth was even greater at 35.4% with an average of $1,106,201.
“In 2017, policymakers at all three levels of government must turn their attention to the supply of homes available for sale,” Cerqua says. “They should consider revisiting land-use designations in built-up areas to allow for a greater diversity of home types, streamlining development approvals and permitting processes, and looking at ways to incentivize landowners to develop their land.”
What else will it take to steady the aggressive price growth we’ve seen so far in 2017?