As this is my final article of the year, I thought I’d reflect a little bit on 2019 and share my thoughts on what the new decade may hold for Toronto real estate.
I think the story of the year will revolve around supply issues in Ontario and the Greater Toronto Area. The economy is healthy, interest rates will remain low through 2020, unemployment is low, immigration is high — it all leads to strong demand for housing.
As part of the More Homes, More Choice: Ontario’s Housing Supply Action Plan, some guides were released this year, including one about co-owning a home and another on how to build or buy tiny homes. There’s obviously a supply issue when co-owning and tiny homes become necessary. I have nothing against these types of housing, but I think it’s safe to say that neither of these are a first choice for most families.
A recent Royal LePage survey discovered that millennials in their 30s are now looking to buy detached homes for their growing families. Likely, many of them have purchased condos in areas like downtown Toronto where prices have surged over the last few years. As much as I’d like to see more families living in high-density housing, the truth is even young people want their own piece of land with a single-family home on it.
It’s been predicted that the median price of a two-storey detached home in the GTA will go up 4.5% in 2020, exceeding $1 million. This strong price growth is due to the lack of supply. Before this year, millennials were having a tough time affording a home in general, but now we’re looking at a flood of millennials hitting the detached home market, driving up demand, and in turn, causing prices to go up even more.
While older millennials will be eyeing single-family homes, younger millennials will likely be trying to take advantage of the federal government’s First-Time Home Buyer Incentive. The Liberals have promised to expand the FTHBI to allow for the maximum value of a mortgage through the program to be $798,000. I’m not sure if there are any first-time buyers spending this much on their first home, but the new max definitely widens the selection.
I’m still not sure if the FTHBI will make a big impact in the GTA, but there’s no doubt it will fuel demand, and I’m not sure that’s a good thing. When there’s a supply shortage, fuelling demand may not be the best solution to improving affordability.
While the mortgage stress test seems to slow demand, I feel like it also has a way of decreasing supply. I know a few builders who held back units this year because the stress test sidelined some buyers. I think the stress test is working, but I’m not opposed to it becoming slightly more flexible for it to accommodate income growth over the course of the mortgage term.
Overall, I’m hoping there will be a strong focus on building more high-density residential at major transit nodes across the GTA and throughout Ontario in 2020. Let’s use less land, build higher, get cars off the streets, and improve housing affordability for everyone.
Here’s to a year of recovery, hopefully leading into a year of healthy growth and smart planning. Happy holidays to you and your family!