What Happened to the Condo Market in the GTA?
As the function of housing gradually changes from providing shelter to offering investment opportunities, housing prices are rapidly increasing around the world. As the star article ranked Toronto as the world’s 13th most expensive city to own properties, many people, especially young workers wonder what happened to our housing marking. Without enough fund to own a property at a young age, many university graduates decide to rent a condo as their temporary shelters. Surprisingly, the condo market faces the same booming increase in rental price.
As always, changing in price can closely relate to changing in supply and demand. The slow increase in supply resulted from the decline in project development. As a result, fewer condos can rent to consumers who need them. On the other hand, some factors also result in the increase in demand. since the government changes the mortgage insurance rules. The buyers of the house need to have higher qualifications standards, people who have lower qualification may have to find another way to obtain a shelter. Because renting can be the substitute for purchase, people who cannot get the mortgage may choose to rent condos. Moreover, the government introduces the stress test, which is a higher interest rate on the mortgage. If the cost of getting mortgage goes up, people choose to turn away from purchasing houses, which may lead to increase demand in the condo rental. Additionally, governments reduce the credit availability that can be delivered to consumers. In this way, bankers are hard to determine whether borrowers have the ability to pay back their mortgage. Therefore, bankers may reduce their mortgage availability to reduce their risks. In this way, again, people who do not have the mortgage may choose to rent condos. Overall, reducing credit availability, the higher interest rate on the mortgage and higher qualification standards for purchasing houses cause the demand for condos renting exponetially increases.
By and large, although there is a graudal increase in the supply for condos renting, a drastic increase in demand can still push up the price.
Finally, I think the governments need to quickly tackle the increasing prices in condo market by developing new projects. As we know, the housing market is skyscraping, people already encountered inconceivable difficulties for purchasing houses when they are not a suitable candidate for obtaining the mortgage. If the renting price also goes up, people now have no choice rather than spend the larger proportion of their income on housing. If the government does not construct more buildings, for sure, the majority of middle and lower income class will see their living standard dramatically decreases.
