GTA outlook positive but let’s talk about the stress test says TREB

by Steve Randall07 Feb 2019

Last year was a tough one for residential real estate in the GTA but things look rosier for the year ahead.

In its outlook for 2019, the Toronto Real Estate Board says that after the volatility of 2018, sales and prices reported by GTA Realtors through the MLS system should improve this year.

"Many buyers who moved to the sidelines over the past year due to various government policies, including the OSFI-mandated mortgage stress test, have re-evaluated their positioning in the marketplace vis-à-vis home type, location and price point. It makes sense that Ipsos, in its Home Buyers Survey conducted for TREB, found that the share of intending home buyers has increased," said TREB president Garry Bhaura.

Stress test needs to be discussed
The stress test provision of OSFI’s B-20 rules continue to challenge would-be homebuyers and TREB’s CEO John DiMichele says that while there have been positive government action relating the housing market, the lending restrictions need to be revisited.

“While we saw buyers return to the market in the second half of 2018, we have to have an honest discussion on whether or not today's home buyers are being stress tested against rates that are realistic,” he said. “Home sales in the GTA, and Canada more broadly, play a huge role in economic growth, job creation and government revenues every year. Looking through this lens, policymakers need to be aware of unintended consequences the stress test could have on the housing market and broader economy.”

Earlier this week OSFI’s deputy superintendent Carolyn Rogers addressed the criticism of ‘unintended consequences’ by saying that weaker lending standards have been shown to do more harm to financial stability than the benefits they were intended to create.

The year ahead
TREB’s forecast for 2019 is for 83,000 sales, rising from the 77,375 sales in 2018 with the moderate increase underpinned by an uptick in the number of people considering a home purchase, along with continued population growth, low unemployment rate and lower average fixed-rate borrowing costs compared to 2018.

Slightly tighter market conditions, similar to the second half of 2018, will support a moderate pace of price growth with an average selling price in the GTA of $820,000 – close to the peak reached in 2017 and up from an average of $787,195 in 2018. Condos will drive this while the detached sector is likely to lag.

“Despite some uncertainty regarding economic growth over the next year, many traditional housing market drivers remain in place. The GTA population will continue to grow over the next year, as people are attracted to the GTA by the region's diversity of job opportunities. Unemployment is expected to remain very low and home buyers are expected to benefit from lower fixed mortgage rates, on average, compared to 2018," said Jason Mercer, TREB's Director of Market Analysis and Service Channels.

January figures
The year has started on a positive note with 4,009 home sales up 0.6% year-over-year and on a preliminary seasonally adjusted basis, sales were up by 3.4% compared to December 2018.

The MLS® HPI Composite Benchmark price was up by 2.7% compared to January 2018, with condos driving the gain.  The average selling price was up by 1.7% year-over-year. After preliminary seasonal adjustment, the average selling price edged lower compared to December 2018.

"Market conditions in January, as represented by the relationship between sales and listings, continued to support moderate year-over-year price increases, regardless of the price measure considered. Given housing affordability concerns in the GTA, especially as it relates to mortgage qualification standards, we have seen tighter market conditions and stronger price growth associated with higher density low-rise home types and condominium apartments, which have lower average selling prices compared to single detached homes," added Mercer.

More market update:

Industry news

Submit a press release


Do you do commercial deals?