By Toronto Real Estate Board
This past fall, TREB’s Young Professionals Network committee hosted a session on busting some commonly held myths about the GTA Housing Market. TREB’s Director of Market Analysis and Service Channels, Jason Mercer, led the session and we caught up with him to see whether anything had changed since September. Read on to separate the fact from the fiction.
TREBWire: Is the Toronto housing market overvalued?
Mercer: When assessing whether or not the Toronto housing market is overvalued, three factors must be taken into consideration: affordability, local economic conditions and broader economic conditions.
Affordability is a crucial consideration and does not just concern price. The majority of buyers purchase their home with financing from a mortgage, so affordability must also take into consideration whether home buyers can handle their monthly mortgage payments. While the share of average income dedicated to mortgage principal and interest, property taxes and utilities has increased recently, that share associated with the purchase of an average priced home has remained below the federal government’s mandated ceiling of 39 per cent (for government-backed mortgages).
When considering local economic conditions, the key variable would be employment. Buyers need an income to qualify for a mortgage and to afford their monthly expenses. In that regard, job losses or the prospect of job losses would impact the number of sales negatively, while job creation could cause a surge in sales. Local economic conditions improved through much of 2015, with the unemployment rate trending lower.
In terms of the broader economic climate, while the decline in oil prices has affected our economy, other sectors are benefiting from trends such as the declining dollar. Further, the GTA economy is very diverse and offers jobs and opportunities for a broad variety of individuals and skill sets. This helps to offset negative economic impacts.
T: Do homes regularly sell over asking?
M: While some media reports have painted a narrative of homes regularly selling for a substantial amount over the asking price, the statistics present a much different story. For instance, the Average Sale Price-to-List Price ratio for the TREB market area in 2015 was 100 per cent. This suggests that, on average, sellers in today’s market place are realizing their asking price.
T: Are condo apartments overbuilt in Toronto?
M: This narrative is a case of one eye-catching statistic being used to characterize an entire market or a segment of a market. While there are a lot of condos under construction across the GTA, not all of these will be completed at once. We have seen record or near-record completions over the last three years, yet listings, sales and price statistics suggest a balanced market with above-inflation increases in the average condo selling price and MLS® HPI benchmark for apartments.
Plus, ownership and rental demand from young people, newcomers and downsizers has supported the development of condo apartments, and we should continue to see this demand into the future.
Talk to a Toronto Real Estate Board Professional Member REALTOR®. For updates on the real estate market, visit TREBhome.com. If commercial property is what interests you, contact a TREB Commercial Professional Member REALTOR® by visiting trebcommercial.com.
Courtesy of the Toronto Real Estate Board. TREB Wire http://ift.tt/1sM4ywq