Although February 2017 was one day shorter than February 2016 due to the leap year, the number of homes sold that month increased 5.7 per cent year-over-year, climbing from 7,583 home sales in February of last year to 8,014 last month, says the Toronto Real Estate Board (TREB).
“The February statistics tell me that many Greater Toronto Area households continue to view home ownership as a great long-term investment,” said Larry Cerqua, TREB president, in a press release. “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.”
According to the Ipsos survey of intending GTA home buyers, first-time buyers will continue to account for the majority of the demand for ownership housing in the region. For the GTA as a whole, 53 per cent of likely buyers say they would be first-time buyers, up from 49 per cent in 2016.
First-time buying intentions were highest in the City of Toronto, where 64 per cent of potential home buyers are first-time buyers, compared to 56 per cent in 2016. The higher percentage in the City of Toronto is likely due to the number of condominium apartments available, as they are a common entry point into home ownership.
Cerqua says that although there has been a lot of speculation surrounding foreign buyer activity in the GTA, a recent Ipsos survey on the matter found that the impact of foreign buyers in the GTA has been somewhat overblown. GTA-wide, the number of foreign buyer transactions was less than five per cent, yet 80 per cent of foreign buyers were purchasing a home as a primary residence, for another family member to live in, or as an investment to rent out to a tenant, which Cerqua notes 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,” added Cerqua. “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.”
Although the demand for ownership housing grew over the past year, new listings for February were down by 12.5 per cent year-over-year to 9,834. This continues a pattern seen throughout much of 2016, with the sales trend pointing up while the listings trend has been down, resulting in a reduction in the inventory of homes for sale. TREB’s average months of inventory trend for February was one month, but in many GTA neighbourhoods, was down to just 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. Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue,” said Jason Mercer, TREB’s director of market analysis.
The MLS HPI Composite Benchmark Price climbed 23.8 per cent year-over-year in February. The average selling price was also up by 27.7 per cent to $875,983. Annual rates of price growth continued to be strongest for low-rise homes, particularly detached houses. Growth rates for condominium apartment prices were also in the double digits, possibly due to strong demand from first-time buyers.
“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,” added Mercer.
“In 2017, policy-makers at all three levels of government must turn their attention to the supply of homes available for sale,” said Cerqua. “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.”
At TREB’s recent Economic Summit, a panel of industry experts shared their opinion on the growing housing supply crisis in the GTA. Discussing the nature and scope of the crisis and possible solutions, the TREB’s meaning was clear: there is a housing supply crisis and the only way to solve it would be coordinated and innovative solutions by the government, private and not-for-profit sectors.