GTA housing expected to become even less affordable Image

GTA housing expected to become even less affordable

By Lucas DeClavasio on Nov 15, 2017

CIBC released a new report by Deputy Chief Economist, Benjamin Tal, providing a concise and detailed overview of the Greater Toronto Area’s (GTA) housing market. Our main takeaway; land isn’t the problem, it’s the speed of development.

Overall, real estate activity the the GTA and Greater Vancouver will stabilize and soften in the coming quarters as the markets adjust to current regulatory changes, like the uninsured mortgage stress testand foreign buyer tax.

The long term trajectory sees tighter market conditions, supply decreasing, demand staying strong, and there’s no signs of pressure being alleviated. All of this means increased prices and GTA housing becoming even less affordable.

According to the report, the Growth Plan for the GTA and Hamilton area is behind schedule. 77% of the land for community development is not even close to being designated or approved and it could take years to bring it to market.

“So the issue is not land, the issue is the speed at which that land comes to market,” says Tal. “At this point of the game, a complete implementation of the 2031 planned Greenfield supply of low-density housing can be delayed by 7-10 years. And it can be even longer as recent changes to the Growth Plan will make implementation even more difficult.”

GTA housing

And there are other factors that the Growth Plan does not take into consideration. When it was planned, the immigration quota was 250,000. That’s been increased to 300,000 and is on course for 450,000.

This population increase and super slow rate of land becoming available especially affects the development of detached homes. The demand for detached homes isn’t going anywhere, but supply is about to get worse.

Some believe that as more baby boomers age, a surge of detached homes will be added to the resale market. CIBC says not so fast. Apparently, older Canadians are in no rush to sell and over the next 10 years only about 4,000 homes will hit the market due to downsizing.

The supply issue would be even worse if millennials could actually afford to buy homes. Last year, 34.8% of people aged 20-35 years old lived with their parents.

The high price of detached homes has caused many young buyers to turn to the condo market instead, and now we’re even starting to see more families living in condos. Though there’s another issue there as a new report recently pointed out.

2017 has been a wild year for the condo market – the GTA is on pace to hit 36,000 sales, offsetting a pretty weak 2016. Tal believes the condo market is peaking and we’ll see sales level off to around 20,000 a year.

Young buyers and families aren’t the only ones targeting condos though. Investors make up at least 50% of condo purchasers in the GTA. Due to tighter regulations and rising prices, we could see investors losing interest, which will result in an even tighter rental market, potentially leading to even more millennials and younger generations living with their parents for longer.

We’re on a slippery slope. The solution seems to be to find a way to open up more land at a quicker pace, but that’s obviously easier said than done.

Follow NewInHomes.com