GTA home price growth to hit 10 per cent this year: TRREB
A strong economy and rising population will combine to cause a surge in home price growth and sales in 2020, according to the Toronto Regional Real Estate Board’s (TRREB) Market Year in Review and Outlook Report. This may be good news for those who already own a home, but it represents additional challenges for prospective homebuyers.
“Robust regional economic conditions, strong population growth and low borrowing costs will support increased home sales in 2020,” says TRREB President Michael Collins. “Market conditions will become tighter, as transactions will continue to outpace the growth in available listings. The resulting increase in competition between buyers will likely result in an acceleration in price growth across all major market segments.”
TRREB is forecasting at least 10-per-cent price growth this year to $900,000, up from $819,319 in 2019, as well as a 10.5-per-cent jump in sales to 97,000, from 87,825 in 2019.
This forecast rate of growth presupposes that price growth will continue to be driven by the less expensive mid-density, lowrise home types and condominium apartments. If the pace of detached home price growth begins 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.
“The fact that tens of thousands of new households form each year in the GTA is testament to our region’s competitiveness on the global stage,” says John DiMichele, TRREB CEO. “We attract some of the best talent available into and across a diversity of economic sectors. However, in order to remain competitive, policy makers need to continue their focus on the constrained GTA housing supply and to ensure we have an integrated and efficient transit and transportation network that will effectively allow the movement of people and goods.”
“It’s a situation that’s been unfolding over the last decade,” Jason Mercer, TRREB’s chief market analyst and director of service channels, told HOMES Publishing. “A lot of these people are looking to purchase a home to find a place to live, yet we’ve seen a flatline in terms of both home completions, and that feeds into a flatline, even a downward trend in some cases in terms of listings.”
While the GTA 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 there are still forces working against more balanced market conditions in the GTA rental market, TRREB says. 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. The organization expects above-inflation annual growth rates in average one- and two-bedroom condominium 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,” says Mercer. “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.”
TRREB’s report this year focuses on planning for growth in the Greater Toronto Area and broader Greater Golden Horseshoe, with the subtitle “The Time is Now.” Contributions from several organizations all point to the same conclusion: Immediate government support to address housing supply and infrastructure – otherwise, home prices will continue to rise to prohibitive levels.
“Everyone realizes, if you’re thinking about our region both in terms of housing people and also remaining competitive, because if you’re attracting business, people will want a ready supply of housing, and that’s something that’s been quite constrained,” says Mercer. “So, moving forward, we need all levels of government to focus on bringing on more supply, but also great diversity of supply.”
“Toronto’s booming economy has brought with it housing affordability challenges that will continue throughout the next decade,” says Frank Clayton, senior research fellow, Ryerson University’s Centre for Urban Research & Land Development. “Both the provincial and municipal governments must support a massive increase in the supply of all types of housing and tenures as priority number one and quickly transform the land use planning system to make this happen.”
The Centre for Urban Research & Land Development conducted a study that examined the economy and housing market up to 2031, which shows continuing deterioration of affordability.
“We expect a lot of employment growth, more higher paying jobs in the Toronto region… it’s going to be a good time over the next 10 years for employment and income growth. But, unfortunately, incomes on average will not rise as fast as housing prices or rents, so affordability will continue to be a very serious problem, in fact, get worse.”
Adds Paul Smetanin, president and CEO, Canadian Centre for Economic Analysis: “To accommodate the 480,000 new daily commuters that are expected to join the system between now and 2041, transportation infrastructure capacity will have to increase significantly, and especially for public transit. To get there without making congestion worse, it’s going to be very important to evaluate each new investment in transportation infrastructure on the basis of its productivity to make sure pressure is relieved in the right places.”