The Toronto Real Estate Board released its monthly resale housing market results for February 2019, reporting a drop in sales and a need to revise the mortgage stress test.
In February 2019, there were 5,025 home sales reported through the MLS system, which is a 2.4% year-over-year drop. This is also a decline from January sales activity. Detached and semi-detached sales remained steady compared to a year ago, but townhome sales fell 6% and condo sales dropped 5.7%. TREB believes the mortgage stress test has something to do with the decline in activity.
“The OSFI mandated mortgage stress test has left some buyers on the sidelines who have struggled to qualify for the type of home they want to buy,” says TREB President Gurcharan (Garry) Bhaura. “The stress test should be reviewed and consideration should be given to bringing back 30 year amortizations for federally insured mortgages. There is a federal budget and election on the horizon. It will be interesting to see what policy measures are announced to help with homeownership affordability.”
While sales fell, the rate of new listings actually dropped even more, which made for tighter market conditions, supporting strong price growth.
The overall average selling price of a home in the GTA increased 1.6% year-over-year to $780,397. The greatest price growth was seen in the semi-detached market with the average increasing 9.9% year-over-year to $832,569. Condo price growth followed with a 6.1% jump to $562,161. Though the average price of a detached home fell 2.1%, it’s still the least affordable home type averaging $980,914.
“Home sales reported through TREB’s MLS® System have a substantial impact on the Canadian economy,” says Jason Mercer, TREB’s Director of Market Analysis and Service Channels. “A study conducted by Altus for TREB found that, on average, each home sale reported through TREB resulted in $68,000 in spin-off expenditures accruing to the economy. With sales substantially lower than the 2016 record peak over the last two years, we have experienced a hit to the economy in the billions of dollars, in the GTA alone. This hit has also translated into lower government revenues and, if sustained, could impact the employment picture as well.”
On the rental side from January to February 2019, there has been a dramatic year-over-year increase in rents, which is preventing many first-time buyers from saving up enough to make a down payment on a home.
The average rent for a one-bedroom increased 8.1% to $2,145 and for a two-bedroom the average rent went up 7.4% to $2,810. The story of high demand and low supply continues to plague the rental market.
“With vacancy rates hovering in the 1% range and average rents increasing in the high single digits, it is clear that signing a lease for a rental unit is not an easy proposition in the GTA,” says TREB CEO John DiMichele. “While some rent control provisions have been relaxed by the new provincial government, policy makers need to look at further initiatives to encourage rather than discourage investment in rental apartments. A recent Ipsos survey conducted for TREB found that almost one-quarter of investment property owners are very likely to list their property for sale this year, which is concerning in an already tight rental market.”