No end in sight to spiralling real estate costs, say industry expertsGetty Images/iStockphoto
As GTA home prices continue their record-smashing upward trajectory, buyers and sellers alike are asking: Is there an end in sight?
Not in the foreseeable future, answer realtors and builders. Demand is too high, resale and new homes continue to be in short supply and interest rates remain low.
"On both counts – price and number of sales – we'll see a record year in 2015 and prices will continue to trend upward," says Jason Mercer, director of market analysis for the Toronto Real Estate Board (TREB).
Based on a trend first seen in August, when the growth in new listings outstripped sales for the first time in many years, there may be some relief for resale home buyers.
"If this continues over the next year, it may alleviate some of the pent-up demand," says Mr. Mercer, though it won't likely be enough to halt the push in prices. "It is still very much a seller's market in low-rise."
A TREB report released in October said the average price of a resale home in Toronto for September was a stunning $1.05-million for a detached house, $740,373 for a semi-detached, $527,257 for a townhouse and $418,603 for a condo apartment.
In the 905 region, the average price in September for a single family house topped out at $732,852, a semi-detached unit came in at $497,775, a townhouse at $448,930 and a condo apartment at $307,295.
GTA-wide, the average price of a detached house reached a new high of $819,853. Year-over-year, this represents an 11.2 per cent increase. Meanwhile, the average price of a condo apartment in the GTA rang in at $385,623, up five per cent year-over-year.
Brian Tuckey, president and CEO of the Building Industry and Land Development association (BILD), which represents new home builders, land developers and renovators across the GTA, points out that the price gap between low-rise and high-rise homes has been steadily growing for 10 years. In 2005, the spread was $100,000 and now it is $450,000, signifying a real demand for low-rise housing.
There are a number of factors driving the GTA housing market, including:
• Historically low interest rates.
• Immigration. The GTA welcomes about 100,000 immigrants or 35,000 new households every year.
• Scarcity. Despite the August boost in the number of houses hitting the market, there continues to be a shortage of listings.
• Investors are snapping up condos when they hit the market, then selling them upon completion, helping to drive up prices.
• Unlike other parts of the country, the economy and jobs picture in Greater Toronto is buoyant with strong fundamentals.
A Real Insider housing study says that in August, new low-rise construction prices across the GTA were up 16 per cent to $800,099 from the same time period in 2014. High-rise units came it at an average of $450,837, up one percent from the previous year.
Mr. Mercer notes that more than 80,000 resale homes were sold in the first nine months of 2015, up 9.5 per cent compared to the first three quarters of 2014. "We are on track for 100,000 sales this year, which is certainly a record in terms of transactions."
Mr. Mercer and Mr. Tuckey believe that warnings of the housing bubble about to burst in the GTA are overstated. Despite this, an August CMHC report says that Toronto's housing market is now facing a "high" risk of correction as prices outstrip income growth.
Also, a new Bank of Montreal survey says that nearly one in six Canadians would be unable to afford a $500 monthly increase in their mortgage payments, which would happen in the event of a three per cent interest rate jump.
Mr. Tuckey feels that municipalities could do more to alleviate the high cost of housing by pre-designating and rezoning land on transit corridors and green field areas, which helps control costs passed on to buyers.
He adds that getting critical infrastructure, such as waste-water systems and public transit, in place before development applications come on stream would also help new housing reach market quicker.
"The fundamentals in the Toronto region are very strong and the challenge is to find land that meets the price people can afford. There is a very large demand for low-rise pushing a constrained market."
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