solution to the GTA housing problem

Distinguished economist Benjamin Tal says that rentals “must be part of the solution” to the GTA housing problem

• The GTA is not a normally functioning market due to a history of legislation failure, as well as a severe lack of land;
• House prices, while always on the rise in the GTA, have followed a “predictable path” until 2016, when the average-home price increase spiked by 17.3% and is currently at over 20%;
• Unexpectedly, condo prices followed suit to almost parity, rising by 16% in the fourth quarter of 2016;
• Contrary to the perception that there are “too many condos”, condo sales increased by a record 34%, while the supply was down by 6%;
• The demand for housing in the GTA is not only strong but “stronger than perceived” due to “undercounting of the number of non-permanent residents”;
• Government intervention to prevent the house prices to grow at this rate, such as foreign tax policy and new mortgage rules do not make a significant difference in an atypical market such as the GTA.

 

• An increase of supply of rental units is desperately needed in the GTA for a “real and lasting change”;
• The GTA’s rental market has “never been hotter” with average rent rising by a record of almost 12%;
• The new wave of renters (young families) will need “stability of long-term renting”;
• For builders in the 416 area, the gap between the profitability of condos and profitability of purpose-build is very narrow; on surplus land, it makes even more sense to favour purpose-built;
• Incentives from the government on new rental projects will make the difference between an “affordable and an unaffordable GTA housing market”: expediting the approval process for purpose-built projects, allowing higher intensification rates and cutting the HST will ultimately encourage builders to complete purpose-built projects before a full-blown affordability crisis.

Developers: Thinking of Building New Apartments? See Here!

New Apartment Construction in the GTA from 2002-2017.
*Dip in 2017 is due to unit numbers yet to be announced.*