Central Toronto Real Estate TRREB Released January, 2020 Resale Market Figures
Toronto Area REALTORS® reported 4,581 home sales through TRREB’s
MLS® System in January 2020 – up by 15.4 per cent compared to January
2019. On a preliminary seasonally adjusted basis, sales were up by 4.8 per
cent compared to December 2019.
The Toronto real estate market showed very strong growth in the
number of sales up against a continued dip in the number of new
and available listings in January, 2020. Tighter market conditions
compared to a year ago in 2019 resulted in much stronger growth
in average selling prices.
Steady population growth, low unemployment and low borrowing
costs continued to underpin substantial competition between
buyers in all major market segments.
The MLS® HPI Composite Benchmark price was up by 8.7 per cent
compared to January 2019 – the highest annual rate of growth for the
Benchmark since October 2017. The condominium apartment market
segment continued to lead the way in terms of MLS HPI® price growth,
but all home types experienced price growth above seven (7) per cent
when considering the TRREB market area as a whole. The average
selling price in January, 2020 was up by 12.3 per cent, driven
by the detached and condominium apartment segments in the
City of Toronto.
A key difference in the price growth story in January 2020
compared to January 2019 was in the low-rise market segments,
particularly with regard to detached houses. It is clear that many
buyers who were on the sidelines due to the OSFI stress test are
moving back into the market, driving very strong year-over-year
sales growth in the detached segment. Strong sales up against a
constrained supply continues to result in an accelerating rate of
price growth.
TRREB 2020 Outlook Summary
The following points summarize TRREB’s outlook for 2020 and results of the
Ipsos Home Owners and Home Buyers surveys:
Strong underlying demand drivers should see home sales crest the
90,000 mark in 2020, with a point forecast of 97,000 – up by almost
10.5 per cent compared to 87,825 sales reported in 2019. Sales growth
will be driven by the higher density low-rise market segments
(semi-detached houses and town houses) and the condominium
apartment segment. These home types are more affordable, on average,
and will remain popular with the OSFI mortgage stress test existing for the
future.
More than half of intending home buyers claimed to have been affected by
the OSFI mortgage stress test. In order to adjust to the more stringent
qualification standards, intending buyers followed a number of different
paths. The most common responses involved changing home price, type
or location. Some intending buyers also looked to alternate lenders, such
as credit unions or the secondary lending market.
The most popular home type for intending buyers was the detached house.
However, the share of intending buyers GTA-wide who sought a detached
house has declined markedly since the first survey in 2015 – from 54 per
cent in the fall of 2015 to 42 per cent in the fall of 2019. This decline was
evident both in the City of Toronto and surrounding regions. An increase
in buying intentions for condominium apartments and semi-detached
homes has accounted for the dip in detached buying intentions.
Unless we see a significant increase in supply, it is highly likely
that new listings will not keep up with sales growth in 2020. The
end result will be an acceleration in price growth over 2019, as
an increasing number of home buyers compete for a pool of
listings that could be the same size or smaller than in 2019.
The point forecast for the overall average selling price in 2020 is
$900,000, close to a 10 per cent increase compared to the average of
$819,319 reported for 2019. This forecast rate of growth presupposes
that price growth will continue to be driven by the less expensive
mid-density low-rise home types and condominium apartments. If the
pace of detached home price growth starts to catch up to that of other
major home types, the average selling price for all home types combined
could push well past the $900,000 mark over the next year.
While we did see an improvement in condominium apartment rental
supply in 2019, recent consumer polling coupled with the potential for
smaller returns on investment from rental income suggests that there are
still forces working against more balanced market conditions in the GTA
rental market. Policymakers at all levels of government need to be mindful
of rental supply requirements as the GTA population continues to grow on
the back of a strong regional economy and strong immigration. Expect
above-inflation annual growth rates in average one bedroom and
two-bedroom condominium apartment rents to be sustained in 2020.
“After more than three years of slower market activity brought on largely
by changes in housing-related policies at the provincial and federal levels,
home sales will move closer to demographic potential in 2020. The key
issue, however, will be the persistent shortage of listings. Without relief
on the housing supply front, the pace of price growth will continue to
ramp up. Policy makers need to understand that demand side initiatives
on their own will only have a temporary impact on the market,” said
Jason Mercer, TRREB’s Chief Market Analyst and Director of
Service Channels.
The Toronto Regional Real Estate Board is urging caution on the issue of
a possible vacant home tax in the City of Toronto. A measured approach to
the issue can help to avoid any unintended consequences on the housing
market and property owners. TRREB is concerned there is not enough
empirical city data or evidence to support this approach.
It is also important to point out that, just three years ago, City Council
increased the Municipal Land Transfer Tax (MLTT) on all home buyers
by an additional 0.5 percentage point and added an additional upper tier
rate of 0.5% on homes priced over $2 million to match the provincial LTT.
Continuous increases to the MLTT is an unsustainable and risky fiscal
strategy for the City.
While the current suggested MLTT increase by some councillors is focused
on higher-priced properties, TRREB is also warning about the potential
impact of this proposal on lower-priced properties. The real estate market
functions as a continuum. Policies that impact certain price points can
have a trickle-down effect by influencing move-up decisions of home-buyers,
thereby preventing the supply of lower-priced properties from being
freed-up for other home buyers. Anecdotal and statistical evidence suggests
that the MLTT has a direct impact on mobility.
Source: Toronto Regional Real Estate Board
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