After a period of decline which kicked off towards the end of 2017, Toronto’s housing market is bouncing back and now experiencing the fastest accelerated growth. 219 saw housing prices jumping the most since 2017. According to a report by Toronto Real Estate Board, the benchmark price rose 5.8% from 2018 to $810,900 in 2019, taking it to about $4,300 of the 2017 record. The real estate board warns that property prices in Toronto will continue rising for the next two years. One of the factors fueling the acceleration of property prices in the Greater Toronto Area is demand.
A Rebound In Home Sales
According to the real estate board’s reports, the rising property prices have not discouraged people from buying homes. Housing sales jumped by 14% in 2019 from the previous year, with townhouses and detached family houses leading the gain. Detached homes are the most sought-after. The home sale in 2019 reached about 87,900. Most buyers who were on the sideline because of a raft of measures and policies to cool GTA’s overheated real estate market are moving back to the market, resulting in a stronger year-over-year sales growth in the housing market. Home buying activities picked up in the first quarter of 2019 and was sustained throughout the year.
Housing Supply, Or Lack Of It
Supply remains a defining factor in Toronto’s housing market, both in rental and homeownership. A recent report by Canada Mortgage and Housing Corporation (CMHC) indicates that the gap between housing supply and demand is largest in Vancouver and Toronto. This outlines GTA’s persistence problem in the housing market and the need to address demand drivers. With the accelerating demand against lean supply, property price is expected to continue surging in the coming years. To bring stability to the market, experts advise that the government needs a comprehensive policy that addresses both demand and supply.
Complex Regulations Responsible For Dwindling Supply
Supply bottlenecks are great drivers for housing prices in Toronto. Houses in GTA are being replaced at a slower rate than they were five or six years ago. Although some developers intentionally delayed in anticipation that prices will rise further, the majority of industry representatives blame the delay on complex regulations. A representative from the DG Group said that the firm could sell a house once it got approval because they knew how long the project would take. However, now they are not sure how long a project would take because of the new regulations. A recent survey on land use by Fraser Institute found that Toronto was the most regulated city, with developer required to satisfy about 200 conditions.
Development Costs Discourage New Supply
The high cost of new development has also contributed to the slow growth in housing supply. The fees on development and construction materials are prohibitive. These fees and extra costs raise the cost of housing in the Greater Toronto Area by about 20%. They come in the form of utility costs, property tax, and building permits. To avoid the high extra costs and fees, developers are diverting their resources to other friendlier cities, leaving Toronto in a housing shortage.
Housing prices in Toronto are rebounding after two years of decline and the growth is expected to be sustained for the next two years. The growing property price has not discouraged the demand for housing in the city. However, the housing supply is dwindling because of several factors including the high cost of development and complex development regulations.