Happy August. I can’t believe that the CNE opens soon, which ultimately means the end of summer. Sigh…
Before I get into this new post I would like to point out that I predicted that the major centers in Canada – Vancouver and Toronto would implement a tax to slow down foreign investment. A few weeks ago, the BC government slapped a 15% tax on foreign residential investors.
Today’s topic, though not a new one, pertains to the lack of demand in the GTA for single family residential properties. Prices are being driven up to the point where it’s getting scary. I will include an article from today’s Globe and Mail.
How does this effect Niagara? What happens in Toronto flows through to NOTL. We also do not have a lot of product, which on it’s own is pushing up our prices, maybe not to the same degree, but we are seeing a dramatic upswing in prices attained. I have never seen a better time to sell real estate in NOTL in my 28 years in the business. There you go. The following is the Globe article by Tasmin McMahon.
Lack of supply driving GTA house price surge, studies say
TAMSIN MCMAHON – REAL ESTATE REPORTER
The Globe and Mail
Published Monday, Aug. 15, 2016 7:00AM EDT
Last updated Monday, Aug. 15, 2016 7:01AM EDT
Toronto is in the midst of a housing heat wave, with sales activity and prices both breaking new records in July. But one thing that seems capable of putting the brakes on the market is what the Toronto Real Estate Board has called the “troubling trend” of a shrinking supply of homes for sale, particularly detached homes.
Several new reports out Monday point to just how much the lack of supply – particularly of detached houses, townhouses and other so-called “ground-oriented” housing – has helped drive the region’s house prices into the stratosphere.
Frank Clayton, senior research fellow at Ryerson University’s Centre for Urban Research and Land Development, examined a handful of recent surveys of consumer housing preferences in the Greater Toronto Area (GTA). He found that despite provincial policies that have encouraged a dramatic shift toward building condos rather than houses, most prospective buyers in the region say they prefer a detached house or other low-rise properties, such as townhouses.
Millennial home buyers prefer condos in slightly higher numbers, but most also say they are looking to purchase a low-rise house, according to Mr. Clayton’s research.
House sales numbers back up his research. Low-rise houses made up 66 per cent of all homes sold in the region last year, compared to 34 per cent for condos. Detached resale home prices grew 12 per cent last year, even as resale condo prices rose just 5 per cent.
“Many households demand a single-detached house with a yard as their preferred abode,” Mr. Clayton wrote, warning that to restrict the supply of low-rise housing and encourage more high-rise condo construction “will lead to even higher house prices … and huge capital gain windfalls for the lucky owners of existing houses and vacant lands on which new ground-related homes could be built.”
Detached and semi-detached properties made up less than 27 per cent of new housing starts in the GTA last year, down from nearly 40 per cent in 2009, CIBC World Markets deputy chief economist Benjamin Tal and researcher Katherine Judge point out in a separate report.
While new home construction has picked up steam in Ontario this year, much of the growth has come outside of the GTA, in communities such as Hamilton, St. Catharines and London, says Bank of Nova Scotia senior economist Adrienne Warren.
Both Mr. Clayton and the CIBC economists point the finger at provincial policies aimed at curbing urban sprawl that have restricted the amount of new land available for low-density housing developments and driven up the costs of building new houses. The Ontario government recently proposed even higher density targets for municipalities, which will also add to the shortage of land for detached homes, the CIBC economists say.
At the same time, extended low interest rates have created an “affordability mirage” that has only fuelled demand, enabling more people to stretch themselves financially to buy into the GTA housing market, even in the face of skyrocketing prices.