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Saturday , 25 March 2017
Despite high prices, buyer intentions strong in Toronto housing market

Despite high prices, buyer intentions strong in Toronto housing market

In every month for the past three years and more, sales of existing homes in Toronto were higher than in the previous month, measured year over year. Now the first sales report for 2017 is in, and the upward trend continues. The Toronto Real Estate Board reports that January sales were up 11.8 per cent compared to January 2016, with 5,188 residential transactions recorded. As TREB puts it, 2017 picked up where 2016 left off, with higher sales, fewer new listings, and double-digit price increases.

The strongest sales growth by home type was in the condo sector, up 26.7 per cent throughout the GTA, virtually identical in the City of Toronto and the 905. Condo prices were up sharply as well, rising 13.1 per cent and 18.5 per cent in the 416 and 905 respectively. The average resale condo in Toronto in the first month of 2017 cost $471,409, almost a hundred grand more than in the 905 ($379,169).

Sales of detached and semi-detached homes, on the other hand, were down in the 416, entirely due to lack of stock. The average price of a detached home in Toronto rose 26.8 per cent over the year, now coming in at $1,336,640.

Source: TREB

Home ownership continues to be a great investment and remains very important to the majority of GTA households. As we move through 2017, we expect the demand for ownership housing to remain strong, including demand from first-time buyers who, according to a recent Ipsos survey, could account for more than half of transactions this year. However, many of these would-be buyers will have problems finding a home that meets their needs in a market with very little inventory.

All indications are that demand will remain strong this year, though TREB repeats its usual caution that many would-be buyers will have problems finding homes that meet their needs, due to low inventory, now just half of what it was a year ago.

Recent research carried out for the board by Ipsos found that first-time buyers in the GTA could account for more than half (53 per cent) of home sales in 2017, even more (64 per cent) in the City of Toronto. These buyer-intentions percentages are higher than they were one year ago.

Despite the notoriously high prices of real estate in Toronto, the survey found that affordability does not appear to have been a major deterrent for recent homebuyers. The average buyer in 2016 paid $672,023 for a home, with a hefty down payment of 29 per cent. The average income per home-buying household was $98,000, of which 27 per cent was dedicated to the cost of owning the home, which includes mortgage payments, taxes and utilities. This is comfortably below the 32 per cent limit recommended by Canada Mortgage and Housing Corporation’s number one affordability rule for home ownership.

This is not to say that everyone is happy with current housing market conditions. High home prices and lack of a sufficient down payment were common reasons given by those who do not plan to purchase in 2017. Nevertheless, those who do plan to purchase in the GTA appear to be fairly well prepared. Likely first-time buyers say they plan to have, on average, down payments of 23.9 per cent. They expect to pay an average price of $693,178. Two-thirds of them expect to buy a resale property, the remainder to buy new.

Likely home buyers by home type. Source: Ipsos

The number of buyers planning to purchase a condominium in 2017 is also higher than a year ago, second only to the number planning to buy a detached home, the Ispos survey found. High prices and lack of availability of detached homes are factors contributing to that trend.

About Josephine Nolan

Josephine Nolan is the chief editor of Condo.ca—Canada's Condominium Magazine. You can reach Josephine via our contact form. She reads all her mail.

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