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Another year of strength in the Greater Golden Horseshoe Region real estate market is being put under the microscope in a hefty 80-page report issued by the Toronto Real Estate Board (TREB) today. Today's Market Year in Review & Outlook Report focuses on the twin issues of housing and transportation diversity in the region, including a detailed review of 2017 market conditions, a look forward to 2018, and comprehensive research on various aspects the housing industry here.
Economic spin-offs generated by home sales from 2014-2016 were approximately $7 billion, creating 142,000 jobs in the region. New housing construction is responsible for an annual economic impact of $27.2 billion, and roughly 150,000 jobs. This includes substantial tax revenues for all levels of government, with an estimated $2.9 billion in federal, provincial, and local taxes generated annually.
A statement from TREB President Tim Syrianos, issued along with the report, reads “On average, each residential transaction reported through TREB’s MLS® System in the GTA generates $68,275 in spin-off expenditures, according to recent analysis conducted by Altus Group. The real estate industry is a key contributor to our economy, with total annual spin-off expenditures close to $7 billion. From the economic impact of TREB MLS® System transactions, to government revenues associated with residential sales, to the impact of the new construction sector, this new Altus research included in this report highlights the depth to which transactions involving GTA REALTORS positively impact our economy.”
In-depth review of the 2017 housing market shows that annual residential sales declined 18% from the record-setting numbers recorded in 2016, falling to 92,394 transactions from 2016's 113,000. After a strong start to the year in Q1 2017, the introduction of the Ontario Fair Housing Plan (FHP) triggered a dip in the markets during Q2 and Q3. These numbers would recover in Q4 as the psychological impacts of the FHP began to wane, and the introduction of new Office of the Superintendent of Financial Institutions (OSFI) stress test guidelines approached.
Drilling deeper, a year-over-year average price growth of over 30% was recorded in Q1 2017, which TREB identifies as a factor that led to the FHP. The immediate aftermath of the FHP was a noticeable decline in sales and increase in listings, followed by a stabilization in price growth during the second half of the year. 2017's overall average selling price rose by 12.7 % annually to $822,681. While still a strong number, TREB reports that the annual rate of growth owes much to transactions that predate the introduction of the FHP.
The report then considers 2018, with forecasts for the already active year. TREB expects between 85 and 95,000 sales this year, anticipating a decline from the 2017 total. Due to the still strong figures recorded in 2017, year-over-year declines are expected to be more significant during Q1 2018, though as we move into spring and summer, sales are expected to be up on a year-over-year basis.
Polling conducted by Ipsos points towards a flatter sales trend this year, factoring in a dip in first-time buying intentions, the psychological impact of the Ontario Fair Housing Plan on potential buyers, and changes to mortgage lending guidelines. The latter seems to be a notable a barrier for purchasers, with 26% of respondents to the Ipsos poll worried that they won't qualify for a mortgage two percentage points higher than the current market rate.
Average selling prices in 2018 are forecast for between $800,000 and 850,000. As with sales numbers, year-over-year declines in the average selling price are expected in the first half of 2018 as a result of last year's unprecedented figures. Mid-single digit rates of annual price growth are expected to follow in the second half of the year.
Jason Mercer, TREB’s Director of Market Analysis states in the report “Fundamental demand drivers promoting housing demand will remain in place in 2018, including immigration-driven population growth, job creation, and low unemployment across a diversity of economic sectors. However, we must be cognizant of the fact that, in the short term, higher borrowing costs and the effects of federal and provincial policy decisions will act as a drag on demand for ownership housing.”
In addition to assessing past and future market conditions, the report presents questions of transportation and housing diversity in the region, including discussions on how to alleviate pressure on housing supply and how to better shape regional transit policy. This section of the report draws from studies conducted by the C.D. Howe Institute and the Toronto Region Board of Trade, as well as input from policymakers like Mayor John Tory. This area of the report includes segments on the New Homes and Commercial Market, and research on elusive “Missing Middle” housing from the Canadian Centre for Economic Analysis (CANCEA).
Sections in the report draw from a recent release by Altus Group, with plenty of compelling facts about land values, transactions, leasing statistics, the economic impact of the housing sector, and much more. We will return in the coming days with a follow-up presenting new details from Altus Group's report.
