Toronto Real Estate “Affordability Crisis” Continues to Make Headlines

Is the Toronto real estate market facing an affordability crisis today? While condominium prices have eased over the last 12 months, it is the detached and semi-detached properties that have soared in price throughout the COVID-19 public health crisis. With the busy spring buying season here, it is almost an inevitability that North America’s fourth-largest city will experience greater sales activity and more pricing growth amid strengthening demand and falling inventories.

From a different perspective, the Toronto real estate market is hotter today than during the boom in 2016. At that time, the red-hot rally had forced the federal and provincial governments to intervene with various measures, such as tightening mortgage lending standards and limiting the flow of foreign cash.

So, how does the Toronto housing sector look in 2021? A common term that is being frequently referenced – by everyone from media to market analysts – to describe the current state of this urban market is affordability crisis.

Toronto Real Estate Market – March 2021

According to the Toronto Regional Real Estate Board (TRREB), residential sales surged 97 per cent to 15,652 in March. The average home price in Canada’s financial capital increased at an annualized rate of 16.5 per cent to roughly $1.1 million. Industry observers say the substantial push in the Toronto real estate market is a testament to consumer confidence and historically low mortgage rates encouraging sales.

“Confidence in economic recovery coupled with low borrowing costs supported a record pace of home sales last month. While the robust market activity is indicative of widespread consumer optimism, it is also shedding light on the sustained lack of inventory in the GTA housing market, with implications for affordability,” said TRREB President Lisa Patel in a news release.

Like the rest of the Canadian real estate market, it is a case of demand outstripping supply. Although new residential listings jumped 57 per cent year-over-year to 22,709, the annual growth rate is way below transactions.

“With sales growth outstripping listings growth by a large margin, including in the condo market segment, competition between buyers in some market segments and the potential for double-digit price growth could continue without a meaningful increase in the supply of homes available for sale. This will become more apparent as population growth resumes over the next year,” noted TRREB Chief Market Analyst Jason Mercer in a statement.

The positive trend is the growing number of housing starts. According to Canada Mortgage and Housing Corporation (CMHC), housing starts topped 5,100 in March, up from 1,196 in the previous year. Year-to-date, there have been close to 10,000 housing starts in Toronto, up from 6,840 in 2020. Completions have also advanced in excess of 5,100, which is more than double that of the same time last year. In the first three months of 2021, housing completions have exceeded 10,000, up from 7,535 a year ago.

“Affordability Crisis” in Toronto Real Estate Market Continues to Make Headlines

Is it a housing bubble or a housing affordability crisis?

Current market conditions across Toronto (as well as many of Canada’s urban markets) have priced out too many first-time homebuyers, cheap borrowing has ignited bidding wars, and a shortage of inventory is only encouraging this activity.

Overall, these factors have resulted in rising prices, with the average detached property selling for more than $1.7 million. This is an unprecedented average for the city of Toronto, although it should not be too surprising. In the aftermath of the Great Recession, the Toronto housing market launched a decade-long period of enormous growth across multiple property categories.

“Housing bubble? I prefer the term ‘affordability crisis,’” explained Christopher Alexander, Chief Strategy Officer and Executive Vice President, RE/MAX of Ontario-Atlantic Canada, in a statement. “The demand level is at an all-time high and inventory is very low. I don’t see how we’re going to be able to keep up with the demand with population levels expected to rise to new heights.”

So much for the COVID discount that many had anticipated and hoped for at the start of the pandemic.

As a result, more than one-third of young Canadian adults have given up on the dream of owning a home, according to a new Royal Bank of Canada survey. The same poll found that nearly two-thirds of survey respondents (62 per cent) believe the majority of people will be priced out of the real estate market over the next decade. With that being said, 30 per cent admit that they are still thinking about purchasing a home in the next two years.

Many people say that their budget for buying a home is $500,000. The problem? The average price of a Toronto home, across all property types, is just shy of $1 million.

The COVID-19 pandemic has allowed Canadians to accumulate savings. Some studies found that households saved about a fifth of disposable income in 2020. This has fuelled the Canadian economy with billions of dollars in cash that could be injected into the marketplace, including housing. As many households wait for a double-digit correction, these funds could be employed at the right time, allowing the next generation of homebuyers to enter into ownership.

Can Homebuyers Plant New Roots Outside of Toronto?

Even if young families are unable to find their dream home in the heart of Toronto, there are plenty of alternatives throughout the Greater Toronto and Hamilton Area (GTHA), and across the Ontario housing market. The housing boom has indeed seeped into the province’s small towns and rural communities, whether it is northern Ontario or cottage country. But if your household’s budget to acquire a home is $500,000, there are still many great options across the province; you just have to know where to look.

In Renfrew County, for example, near Ottawa, the average home is selling for $400,000. Thunder Bay has an average price of a home sitting at approximately $220,000. Sudbury has properties selling for an average of $385,000. Affordable housing markets remain, but you have to be willing to venture further outside of the Toronto hub.

The post Toronto Real Estate “Affordability Crisis” Continues to Make Headlines appeared first on RE/MAX Canada.



https://ift.tt/eA8V8J
from RE/MAX Canada https://ift.tt/3nEzUmC
RE/MAX Canada

Commentaires

Messages les plus consultés de ce blogue

How Did Windsor Become the Hottest Housing Market in Canada?