Buying a home still a lofty goal in T.O. market
CMHC foresees little change in next two years to high prices, short supply
There is little relief on the horizon for Toronto-area tenants or for home buyers seeking a house with a yard for cookouts and kids, according to the country’s national housing agency.
In fact, despite the political teeth gnashing about the high price and short supply of housing, the region’s shelter situation isn’t expected to change much in the coming two years, says the Canada Mortgage and Housing Corp. in its two-year Housing Market Outlook.
The report released Tuesday suggests only subtle shifts in both the home ownership and rental housing markets.
Toronto-area vacancy rates could wobble upward slightly from about 0.8 per cent to1.1per cent by the fall of 2020. But that won’t make a material difference to apartment hunters, said Dana Senagama, CMHC manager, market analysis for the Greater Toronto Area.
Although there are encouraging signs that there are more rentals coming, including condos, landlords will still have the upper hand when it comes to price because the demand will continue to outstrip supply, says CMHC.
“Everybody talks about ownership and if we’re talking about affordability in this market, we also have to see more activity taking place in the rental market and that market not be as tight. You’re seeing that in the vacancy rate, you’re seeing that in rent growth,” said Senagama. “Ideally, you want more supply coming on board.”
When it comes to owning a home, buyers and sellers can expect less turmoil than the Toronto area has experienced recently, she said. CMHC predicts Toronto home prices will rise at the rate of inflation in the next two years with the resale market recovery continuing into 2019.
But as the cost of borrowing continues to grow and employment levels off, those sales will also moderate into 2020, says the report.
On the new construction side of the Toronto housing market, “the push really is going to be for highrise more and more,” said Senagama.
“Where we’re going to see even less activity is in lowrise, particularly for single, detached homes — and not because the demand is waning — but simply because there’s not enough space out there to build these types of homes,” she said.
“Also, the cost associated with buying any single, detached home right now is averaging over $1million,” Senagama added. “That’s not an amount any buyer — whether you’re a firsttime or a repeat buyer — that you want to enter into.” CMHC predicts between 25,200 and 31,200 housing starts by fall 2020 — 7,300 to 11,100 fewer than this fall. About 85 per cent of those would be multi-family homes.
Nationally, CMHC is predicting housing starts and sales will decline in 2019 and 2020. Prices across Canada are expected to average in the range of $501,400 to $521,600. Although income and employment levels are expected to continue to support demand for new housing, those underlying factors are anticipated to slow.
In October, the average Toronto area home cost $807,340, including all lowrise and highrise housing forms, according to the Toronto Real Estate Board.
“The condominium market, which is currently in sellers’ market territory, is likely to experience above average price growth,” according to the forecast. That means downtown Toronto and the growing condo hubs in the 905 areas such as Markham and Mississauga, will continue to see above-average price appreciation.
Because it is the economic hub of the country with an influx of technology jobs that attract immigrants, particularly skilled labour, Toronto’s “upside risk is higher,” than the national, said Senagama.
“(Workers) are coming in and their starting salaries are significantly higher than what you would (get) in any other profession and that in itself allows this group of people to enter home ownership and not having to wait that long in rental and afford higher priced homes and even more expensive rentals,” said Senagama. Canadians from western provinces, many of them returning Ontario residents, are also strengthening demand for housing in the Toronto area, she said.
The millennial cohort, a demographic that is slowing nationally, is still growing in the job-rich Toronto region. At the other end of the home-buying age spectrum, the population of seniors is also growing, fuelling demand for apartments and smaller homes.