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Unique Toronto Homes

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Toronto Real Estate

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Tag Archives: average price

Report outline challenges to GTA market

Bryan Tuckey – Toronto Sun

I was happy to read a special report released by TD Economics earlier this week, confirming  many of the challenges for the GTA’s housing market I’ve previously addressed in my columns.

The report concluded that while the strong housing market in the GTA over the past decade has benefited many in the region, it drew attention away from some growing issues within the housing market, chief among them include deteriorating affordability, an increasingly weak diversity of housing choice and a transportation system that is struggling to keep up.

Comment: But affordability is NOT deteriorating. Monthly housing costs for the average property at current prices and mortgage rates is within $100 of the monthly costs 30 years ago. Sticker price has increased, yes, but the actual monthly cost has remained much the same. Never mind the wealth of housing choices. From basement apartments to rent, through to apartment buildings and lastly to expensive rental condos. To buy, we have condos and townhouses, semis and detached houses. The variety of choices today has expanded significantly from a generation ago. There used to be nothing but detached and some towns 100 years ago. Then semis came along and we moved from rowhouses to townhouses. Add in apartment buildings and condos and the housing variety increases every day.

Toronto housing market
BILD has long reported the exponential increase in the price of new homes, particularly in the low-rise market which eclipsed $700,000 for the first time in November 2014. Over the last decade, the average price of a new home in the GTA has doubled.

Comment: The price increase is NOT exponential… not even geometric. Get your math straight, it is a simple linear progression. Exponential means a $400,000 house is squared (the lowest possible exponent) and becomes a $160,000,000,000. There are no $160 billion houses anywhere in the world. Doubling is a VERY different thing.

“Higher land costs and restrictive government regulations that have stretched out development project time lines to as much as seven years have made it increasingly difficult to supply housing at an affordable cost across the GTA,” reads the report.

Comment: What does the time it takes to build have to do with cost?

The people most affected by these rising prices are first-time home buyers and new Canadians, who are already challenged to save up for a down payment. As the price gap between high- and low-rise homes continues to grow – reaching a record high of $251,337 a the end of 2014 – many of them have been priced out of the low-rise market entirely.

The report states that rising costs and other incentives have not only tilted new development in the GTA towards condo towers, but to shrinking unit sizes. The focus of supply on small multi-residential units has resulted in growing price premiums for both townhouses and single-detached units across the region, thus contributing to poorer housing choice and reducing mobility of residents.

Comment: Cost is not the main reason behind the surge in condos. Changing consumer preference, delayed buying, later marriages, later kids, fewer kids, suburbs falling out of favour, etc. Cost plays some role, but only as one of 20 different reasons.

Expensive Toronto homes
It also forecasts an increased popularity in renting as a result. This is expected to put additional strain on the under-supplied rental market due to limited new purpose-built rental projects – a market that has been fueled by the new condo market in recent years.

Comment: More renting is partly because of cost, but also because of increasing popularity of living downtown. Of wanting to be mobile. Some are under the mistaken belief that prices will fall and are waiting for that to happen. Many reasons, again, with cost of ownership only being one of those reasons.

Among some of the more positive points found in the report was the fact that as much of one-quarter of Toronto’s job creation over the past 10 years has flowed from the direct and indirect effects of a strong housing market.

BILD has reported that in 2013 alone, the industry has created 177,400 new jobs in construction and related fields. In fact, every new condominium project introduced into the market is responsible for the creation of up to 500 jobs.

Comment: Never mind all the other jobs – especially in tech, app creation and game design.

The GTA is growing by up to 100,000 people each year, but while population growth is beneficial to the economy, it has placed increasing strains on our region’s infrastructure.

Comment: Which is a WHOLE other issue. And the city needs to get started on that yesterday before things really start falling apart.

TD Economics suggest that the most visible challenges are in transit, where an inadequate regional system has led to growing congestion and costs in terms of foregone productivity.

Among the solutions put forth in the report is to strengthen and better align housing policies.

“Developers complain of lengthy permitting processes, while zoning regulations and bylaws are complex and can be out of sync with the official plans,” it explains. “Other unnecessary costs are imposed on new development projects while other policies are detrimental to the housing stock.”

Comment: Definitely. It is not just greenbelt legislation.

According to a 2012 study conducted by BILD, government fees and charges add up to approximately one-fifth of the price of a new home in the GTA.

Comment: No, they don’t. The average new home is over $700,000, as noted above. Are you saying that government fees and charges are $140,000 on each new home? That is laughably wrong. Development charges are $10-20,000 depending on municipality and size. HST is 5%, so another $35,000. Land transfer tax is over and above the price tag – but even so, would only be $20,000 on a $700,000 purchase. All of that adds up to $75,000 at most. And $20,000 of that really doesn’t count. Don’t state incorrect numbers as being accurate when they are not.

“Addressing these challenges through a more collaborative regional approach will be critical to securing economic, social and environmental prosperity in the future,” the report concludes.

There is no easy solution to fix these challenges. No silver bullet. We are all in this together and we should all be part of the solution. The industry, the consumer and government partners must align their vision for this region and work together toward a common goal.

This is not a time for small plans. It’s time for big ideas.

Comment: There is nothing anyone can do. Prices are what they are. Like in New York City, only the rich live in Manhattan. That is what will happen in Toronto. The more money you have, the better the house and neighbourhood you live in. If you have less, you move to Ajax – or Brooklyn.

Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.