June 22, 2012 -- May was another active month for resale housing transactions throughout the Greater Toronto Area. But, even more importantly, May will likely turn out to be the turning point for the listings situation (i.e. lack of thereof) that has been such a big story in the GTA housing market over the past year.
With 10,850 homes changing hands in May, sales were up 11 per cent over May 2011. Sales growth was stronger in the ‘905’ regions compared to the ‘416’ – 14 per cent versus 11 per cent respectively. The fact that sales have been growing at a quicker pace outside of the ‘416’ area code is not surprising in light of a recent Ipsos Reid poll suggesting the City of Toronto’s land transfer tax has prompted many buyers to search for their next home outside of the city.
Tight market conditions continued to result in strong average price growth in May. The average selling price in the ‘905’ regions grew by over seven per cent year-over-year to $484,840. In the City of Toronto, the average selling price was up by six per cent to $568,768.
It should be noted, however, that May statistics indicate that tight market conditions may start to ease in the second half of 2012 and even more so in 2013 because of stronger growth in listings.
The number of new listings, at 19,177, was 20 per cent greater than in May 2011. This strong year-over-year growth rate for listings far outstripped annual growth in sales, which means the May market was better supplied this year compared to last. Homeowners were reacting in greater numbers to the strong home price growth experienced in the GTA over the past year. If growth in listings continues to outpace growth in sales moving forward, competition between home buyers will ease resulting in less upward pressure on selling prices.
The GTA housing market has received a lot of attention over the past year. Some commentators have suggested that because home prices have grown at a quicker pace than income we should expect prices to fall considerably over the next few years. Many of these analyses fail to consider the housing market from an affordability perspective. What needs to be considered is whether or not a household earning an average income in the GTA can afford the mortgage payment, property taxes and utilities associated with the purchase of an average priced home.
When we look at the market in this way we find that over the better part of the last decade, including this year, the share of income going towards major recurring home ownership payments has been in line with underwriting guidelines followed by major lenders and CMHC. Low borrowing costs have largely mitigated strong price increases over the past few years.
Looking forward, expectations for interest rate hikes have moderated considerably over the past month, with increased tumult in Europe. Whereas a month ago the expectation was for the Bank of Canada to start raising rates in the fall of this year, it is now more likely that hikes will be on hold until sometime in 2013.
While the monthly cost of home ownership has remained affordable, home buyers looking to purchase in the City of Toronto continue to face a large financial hurdle: the upfront cost associated with the City of Toronto’s land transfer tax. Greater Toronto REALTORS® see the repeal of the Toronto land transfer tax as another key factor that would benefit our local economy. A recent survey conducted by Ekos Research, which polled 9,500 City of Toronto residents, found that a majority in 86 per cent of City wards want to see the tax repealed.
To effect this change we have launched a new website where you can learn more about our efforts and take action by telling your City Councillor that you oppose the Toronto land transfer tax. I encourage you to visit www.LetsGetThisRightToronto.ca because helping Toronto reach its full potential is in the best interest of us all.
Reprinted from the Toronto Sun