THE GTA REAL ESTATE MARKET
WHERE IT’S BEEN, WHERE IT’S AT, WHERE IT’S GOING.
There are a slew of issues affecting the Housing Market right now: NAFTA negotiations/free trade, the inventory problem, government policies/plans and interest rates to name a few.
Depending on the the outcome of the NAFTA talks, interest rates could potentially go up in October or possibly in December and for sure at least once in 2019 at which point they’re supposed to stabilize. Because we’re still in a time of historically low rates, we’re able to manage the increases but rate increases don’t fare well for First Time Buyers who are the most vulnerable.
I’ll try to stay neutral about the new PC Government but will say one thing…. Housing Platform? What Housing Platform? We still don’t really know what the PC’s have up their sleeves.
Last year, the Liberal government introduced the Fair Housing Plan to curb the lofty market. There was a lot of negative media reporting and 5% of the market was lost as a result yet the inventory problem was never addressed. Mortgage guidelines changed earlier this year but still, the inventory problem remained.
A Look Back Over the Past 4 Years
2015 was the 2nd best year in the history of the Toronto Real Estate Board with sales revenues of $86B. In 2016, first time buyers represented 51% of all sales reported and TREB had the best year ever in terms of sales volume. Then the Fair Housing Plan of 2017, rising interest rates and negative media reporting all contributed to a drop in sales. Yet 2017 was still the third best year in sales and second best in terms of dollar volume. This year we’re expecting to have the third best year in terms of dollar volume. Not bad at all.
One might say that the market has finally entered a balanced state whereby prices increase along with inflation but in the GTA, prices are higher than inflation and the especially in the downtown/central core, it’s still a Seller’s market.
The good news is that in July and Aug, we saw positive inventory growth. What we need is 12 months of healthy inventory growth. Fingers crossed.
What Exactly Drives Housing?
- Income Growth
- Population Growth
In GTA, the rate of employment is at 6%, growth of about 2.5% – pretty strong numbers.
Income is growing at 1.5% which may not seem like a lot, but it’s actually fairly strong.
The newcomer demographic coming into the city are economic contributors and are boosting population growth which is very strong.
Looking at the economy, we had 50 million overnight tourists in the GTA in 2017. They spent $9B in our economy. A favorable economy leads to more jobs and the need for more housing.
Newcomers are the Success Story of the GTA
By the end of 2018 we’ll have likely attracted around 100,000 newcomers this year alone. These newcomers are not the same demographic as even 8 or 9 years ago. In 2011, the profile of immigrants was mainly from the UK, elderly and retired. Now they’re young, educated high earners from China, India, and the Philippines. Further, these newcomers take only 3.5 years to buy homes.
Condo Development Leads the Way
Condo development continues to boom in the GTA despite rising costs and 78% of new construction is multi unit housing. Outlying areas in the east, north and west serviced by the expanding Go Train system will be particularly favourable as will condo living in the city.
While the affordability of single family detached and semi-detached homes will continue to be an issue particularly in the city, more affordable alternatives such as condominiums and townhomes will continue to drive prices in those areas as well.
What’s left to be dealt with is the inventory problem which in an optimum scenario, if given a good 10 years of healthy growth will further the market to bloom at its best.
One thing we don’t have to worry about is any housing crash!
TREB Market Watch.