The Toronto Real Estate Board has debuted their 2017 housing report that puts last year’s real estate transactions under the microscope. The hefty 80-page report, subtitled Steering The Way, focuses on both housing and transportation diversity in the Greater Toronto Area and, in addition to a detailed review of 2017 market conditions, it looks ahead to 2018 while discussing comprehensive research on various aspects of the housing industry.
Here’s the latest real estate press release from the Toronto Real Estate Board, regarding the launch of their third-ever Market Year In Review (2017) And Outlook (2018):
TORONTO, January 30, 2018 — The Toronto Real Estate Board will release its annual Market Year in Review & Outlook Report today at the Board’s Economic Summit.
This report captures statistics recorded through TREB’s MLS® System for 2017 and provides a market outlook for 2018, as well results from Ipsos consumer surveys and an economic impact analysis conducted by Altus. This information will help readers better understand our marketplace and the policy issues that inform it. Specifically, this edition focuses on questions of transportation and housing diversity in the broader Greater Golden Horseshoe Region and also shares some new research on how the real estate industry contributes to our economic engine.
“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,” said TREB President Tim Syrianos.
2017 Year in Review
In 2017, annual residential sales were down compared to the record level set in 2016. Total sales reported through TREB’s MLS® System amounted to 92,394 – down by 18 per cent compared to over 113,000 transactions in 2016.
Record sales in Q1 2017 were followed by a decline in Q2 and Q3 after the Ontario Fair Housing Plan (FHP) announcement and the associated psychological impacts. The pace of sales picked up in Q4, as the impact of the FHP started to wane and some buyers arguably brought forward their home purchase in response to the new Office of the Superintendent of Financial Institutions (OSFI) stress test guidelines effective January 1, 2018.
Home prices and home price growth also differed throughout 2017. Year-over-year average price growth of over 30 per cent was reported in the first quarter. This was arguably one of the triggers that prompted the announcement of the FHP. Following the onset of the FHP, sales declining and listings increasing, market conditions started to balance out, with the annual rate of price growth moderating in the second half of the year.
The calendar year 2017 average selling price was up by 12.7 per cent annually to $822,681. Although annual growth in the average price was generally positive on a year-over-basis throughout the year, the overall annual rate of growth was underpinned by pre-FHP transactions.
Looking forward, the forecast range for TREB MLS® sales in 2018 is between 85,000 and 95,000. The midpoint of this range suggests an annual sales count slightly lower than the 2017 total. It is anticipated that year-over-year declines will be more pronounced in the first four months of 2018, as comparisons are made to the record pace of sales at the beginning of 2017. Conversely, sales are expected to be up on a year-over-year basis as we move through the late spring and summer months.
Ipsos polling of intending buyers supports a flatter sales trend in 2018, with buying intentions lower compared to a year ago. Of particular note is the dip in first-time buying intentions over the past year. There remains a degree of uncertainty in the marketplace due to the psychological impact of the Ontario Fair Housing Plan and changes to mortgage lending guidelines. First-time buyers are flexible – they can continue to rent or live with family, for example, while they decide when, where and what type of home they intend to purchase.
Changes to mortgage lending guidelines, including the OSFI-mandated stress test, will affect home buyers. The Ipsos survey of intending buyers found that 26 per cent of intending buyers felt that they wouldn’t qualify for a mortgage two percentage points higher than the current market rate on their home of choice. However, in response to the stress test, many intending buyers will change the type and/or location of home they are looking to purchase or potentially tap other down payment sources, rather than simply deciding not to purchase a home.
The forecast range for the average selling price in 2018 is between $800,000 and 850,000. The midpoint of that range suggests a slight increase in the average selling price this year. Similar to sales, year-over-year declines in the average selling price will likely be reported in some months during the first half of the year, as comparisons are made to the high price levels reported at the beginning of 2017. During the second half of 2018, annual rates of price growth will be in the mid-single digits, with enough competition between buyers to see rates of growth above the rate of inflation.
The pace of home price growth will not be uniform across market segments in 2018. Expect tight market conditions for condominium apartments to underpin continued double-digit rates of price growth in this market segment. Conversely, the pace of growth for more expensive detached homes will be less brisk.
“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. It is also probable that provincial rent control legislation will stunt the supply of available rental units, resulting in a continuation of average rent growth well-above the rate of inflation,” said Jason Mercer, TREB’s Director of Market Analysis.
Housing and Transportation Diversity Research
In addition to analyzing how market fundamentals influence demand, supply, and price growth, the report also includes several sections with new research focused on improving our regional transportation network. Studies from the C.D. Howe Institute and the Toronto Region Board of Trade, as well as submissions from government policymakers, including Toronto Mayor John Tory and other GTA Regional Chairs and mayors, all serve to identify the main issues with, and present innovative, evidence-based approaches to, solving these problems.
“The transportation infrastructure in the Greater Golden Horseshoe needs improvement, especially if we’re to keep up with the demographic changes that continue to shape our region. This report is full of evidence-based research and data that can help to serve as the basis for implementing innovative and practical solutions to many of the transportation and transportation infrastructure problems we face today, which is critical, because waiting to solve these issues is not an option,” said TREB CEO John DiMichele.
The report also features sections on the New Homes and Commercial market segments, and presents exciting research on the “Missing Middle” in housing from the Canadian Centre for Economic Analysis (CANCEA), which seeks to provide a new solution to address ongoing housing supply pressures in the region.
Click here for the full Market Year in Review & Outlook Report 2018.
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