Friday, February 21, 2020
The Toronto Regional Real Estate Board (TREB), Canada’s largest real estate board, with more than 56,000 residential and commercial professionals, brought to light the fifth annual Market Year in Review and Outlook Report at the Economic Summit recently. The research and report findings consists of multiple presentations on the Toronto housing market and the principal economic drivers in the Greater Toronto Area (GTA) housing market such as infrastructure, policy changes and so on.
The Toronto 2020 market outlook highlights the increased demand for home ownership as well as rental housing as more people flock into the area. TRREB’s forecast expects robust growth in home sales and increase in house selling prices but the supply of listings is expected to be more or less the same than before.
“Strong regional economic conditions, population growth and low borrowing costs will prop up home sales in 2020. Market conditions will become stringent; as transactions will carry on to outnumber the growth in available listings. The resultant increase in competition between buyers will likely cause accelerated price growth in the Toronto market,” spoke TRREB President Michael Collins at the event.
“The reality that tens of thousands of new households establish each year in the GTA is evidence to our region’s competitiveness on the global stage. We catch the attention of some of the best talent available into and across a diversity of economic sectors. However, in order to remain competitive, policy makers need to continue their focus on the constrained GTA housing supply and to ensure we have an integrated and efficient transit and transportation network that will effectively allow the movement of people and goods. Research in this year’s Market Year in Review and Outlook Report addresses these important topics,” spoke John DiMichele, TRREB CEO.
The points below summarize overall real estate market in the GTA, including TRREB’s forecast for real estate 2020, with results from the surveys of Ipsos Home Owners and Home Buyers: Persistent demand from home buyers should see Toronto home sales peak the 90,000 mark in 2020, with a point forecast of 97,000 for the TRREB market area – this is up by almost 10.5 per cent compared to 87,825 sales reported in 2019.
Majority of the prospect home buyers claimed to have been affected by the OSFI mortgage stress test. In order to adjust to the more stringent qualification standards, prospective home buyers ventured a number of different paths such changing home price, type or location. Some of the prospect home buyers also looked to other financial lenders, such as credit unions or the secondary lending market. However, it is imperative to note that Ipsos results also indicate that fewer prospect home buyers seem to have been impacted by the OSFI mortgage stress test in York Region compared to the GTA as a whole.
According to the data, the most popular home search for prospect home buyers was focused on the detached house. However, the number of prospective home buyers in GTA who looked for a detached house declined greatly since the first survey in 2015 – from 54 per cent in the fall of 2015 to 42 per cent in the fall of 2019. In York Region, however, the number of prospect home buyers focused on a detached home was slightly higher, at 45 per cent.
If there is not a notable increase in supply of home for sales in the near future, it is highly unlikely that new listings will stay at par with the sales growth in 2020. The aftermath will be an accelerated house price growth over the next year, as an escalating number of home buyers vie for a pool of listings.
The real estate outlook for the overall average selling price across the TRREB market area in 2020 is $900,000, and it is close to a 10 per cent increase compared to the average of $819,319 reported for 2019. This rate of growth considers that price growth will continue to be driven by the more affordable, moderate-density and low-rise house models and condominium apartments. If the pace of detached home price growth starts to catch up to that of other major home models, the average selling price for all home types combined could exceed well beyond the $900,000 mark over the next year.
“Subsequent to more than three years of stagnant market activity factored mainly due to amendments in housing-related policies at the provincial and federal levels, home sales will move nearer to demographic potential in 2020. The major challenge, however, will be the constant lack of listings. Without reprieve on the housing supply aspect, the rate of price growth will persist to amplify. Policy makers need to understand that demand side initiatives on their own will only have a temporary impact on the market,” said Jason Mercer, TRREB’s Chief Market Analyst and Director of Service Channels.
“During the recent federal election campaign, Ipsos acknowledged affordability issues as being top of mind for Canadians, and essential to those concerns are housing costs in Canada, especially the GTA in particular. In the coming year, governments will undoubtedly be focused on how their policies are affecting the frail balance between housing supply and demand, and how they can best provide relief to Canadians’ moneypockets in the area of housing costs,” said Sean Simpson, Vice President at Ipsos.
“Toronto's booming economy has brought with it housing affordability challenges that will continue throughout the next decade. Both the provincial and municipal governments must support a massive increase in the supply of all types of housing and tenures as priority number one and quickly transform the land use planning system to make this happen,” said Frank Clayton, Senior Research Fellow, Ryerson University’s Centre for Urban Research & Land Development.
To summarize the outlook report for Toronto real estate, in 2020, sales and house prices in Toronto and surrounding areas will continue to rise as will demand, however, supply of listings will be scarce. House affordability will still remain a challenge to home buyers and rentals will become popular among the