Nowhere in Canada is the demand higher for housing than in Toronto. The local construction sector is headed for its 10th straight year of growth despite efforts to cap the ever-increasing price of housing in the Southern Ontario market, states Vlad Rigenco, a Real Estate Agent in Toronto. This comes on the heels of a 15-year high in net immigration into the Greater Toronto Area, and reports that almost 700,000 first-time buyers will target markets in the area, competing with not-quite-ready-to-retire-or-downsize Baby Boomers. In fact, research shows that Baby Boomers are not expected to downsize until at least 2040, which means the supply of housing will continue to be at an all-time low.
Attempts to Cool the Market Have Not Succeeded
Efforts have been made to cool the market, including the implementation of foreign buyer taxes, higher interest rates and stricter mortgage qualification rules, which has left many questions as to where the market is headed in the coming years.
Several analysts have pointed to the end of the housing price boom and a slowing economy in the face of rising interest rates and stricter mortgage rules. However, prices in southern Ontario continued to rise — Toronto rose by 3.72%, Hamilton by 4.4%, and Ottawa by 5.87% — in 2018.
Increased Housing Costs
Canadians were fortunate to escape the effects of the 2008 collapse in home prices in the U.S. and Europe, and home prices have risen consistently for almost 16 years. Even though the markets are cooling in many other areas of the country, Ontario is expected to post the biggest annual rise in house prices of 3.3% in 2019, to an average of $588,900.00, states Vlad Rigenco.
Ontario also accounted for 37% of all dwelling construction in Canada, indicating that the construction sector is alive and well in the province, despite being down in other areas of the country.
February 2019 was a particularly weak month for home sales across Canada as they dropped to a 10-year low — to the worst prices since the financial crisis of 2008, says Vlad Rigenco. This signals that efforts to reign in massive mortgage debt and increasing home prices have met their mark. Since then, prices have recovered somewhat, and home sales are expected to pull back by 1.6 percent to 450,400 this year, which is the weakest annual sales since 2010.
How to Fix the Issue?
Interestingly, experts also state that the housing affordability crisis cannot be addressed by increasing supply alone. For example, in Toronto in 2018, 14,771 new homes came on to the market: a number just shy of the anticipated population growth of 41,000 per year. However, average families made $82,859 per year according to the most recent census, which falls very short of the average home price in Toronto of $767,800. It is clear, then, that much more needs to be done to address the housing affordability crisis in Toronto and across the country, according to Vlad Rigenco. This could potentially be accomplished by ensuring that new developments are made to include units which are rent-controlled, social and/or otherwise affordable housing.
The real estate market in Ontario is on the cusp of change after rapid growth over the last decade. Toronto and Vancouver continue to enjoy growth — albeit at a slower pace than in the past — while the effects of the government’s stricter mortgage regulations are being felt more acutely in other areas of the country.