Some new home sales figures for the Greater Toronto Area came out at the beginning of this week, and it got me thinking about various housing market initiatives addressing affordability, and whether or not they are truly solutions or just fuel for the flame.
According to the Building Industry and Land Development Association, and Altus Group, the average price of a new single-family home in the GTA in October 2019 was slightly over $1 million (more than 3% lower than the same month in 2018). The average price of a new condo unit jumped 7.5% to $833,827, which is unaffordable for most first-time buyers.
David Wilkes, BILD President & CEO, even said in the report that, “Based on population projections, it is clear that the demand for housing in the GTA is not going away.”
So, with prices this high and demand going strong, why are there so many “affordability” solutions that fuel demand? With low supply, wouldn’t making it easier for more people to buy homes just drive prices up?
For example, if the mortgage stress test was eased, more people would qualify to buy. Or if uninsured mortgages were extended to 30 years, then more people would be buying, but also taking on more debt.
There was a time when I wanted longer mortgages and a more flexible stress test, and honestly, I’m still kind of in favour of them because I want people to be able to buy homes, but the numbers don’t lie. Condo sales in October were 13% above the 10-year average, and this year was slower than last year. So even with average prices exceeding $800,000, sales are still strong!
The GTA’s population is supposed to grow by the millions over the next couple decades, and families need places to live. It’s more obvious now than ever before that more supply is the answer. And it’s not just a matter of building more, we need to be building faster. Projects sit in the pre-construction phases for too long, sometimes years.
I’m starting to think that if more units were brought to market in a more timely manner, then we wouldn’t need longer mortgages or a softer stress test. We probably wouldn’t even need the federal government’s First-Time Home Buyer Incentive.
The GTA is a desirable place to live for countless reasons. Why are we spending so much time and money on initiatives that fuel demand? I can’t help but feel like we’d be further ahead on the affordability crisis if all our resources were focused more on how to build more high-density housing near major transit nodes across the region.
I’m not saying there shouldn’t be some assistance for first-time buyers, and of course continued action needs to be taken to support the strong demand to live in the GTA and Ontario, but at this moment in time, demand is strong, and it’s not going anywhere. Let’s focus on supply, build more homes where we need them to be built, and watch the affordability crisis dissipate.