Toronto is in the midst of a new housing affordability crisis
After a brief lull due to hesitancy among buyers and sellers when the COVID-19 pandemic first hit last spring, Toronto's housing market has been heating up again at the rate of a 2016 MacBook Pro battery. Or, as it were, Toronto's housing market that same year.
That is to say that sales and prices have been spiking in Canada's largest city throughout the first few months of 2021. This, after an already record-setting year driven mainly by activity in the latter half of 2020.
Rumours of a housing bubble (and the inevitable pop of said bubble) are once again swirling as values soar and demand surges. Economists have been freaking out over the prospect of a bubble with some regularity in recent years. We're due for one, apparently, given how fast home values have been rising this past decade.
An executive from the Canadian real estate giant RE/MAX says we should disregard the bubble talk and pay attention instead to what he calls a "housing affordability crisis."
"Housing bubble? I prefer the term 'affordability crisis. The demand level is at an all-time high and inventory is very low. I don't see how we're going to be able to keep up with the demand with population levels expected to rise to new heights."
- Christopher Alexander, RE/MAX
Not to be confused with the already well-established afforable housing crisis, which has been blamed for skyrocketing rates of homelessness due to a lack of accomodations for low-income residents, a new report from RE/MAX warns that Toronto may soon run out of reasonably-priced homes to sell at all.
"We've experienced some unexpected market shifts in the wake of Covid-19," said the Chief Strategy Officer and Executive Vice President for RE/MAX of Ontario-Atlantic Canada, Christopher Alexander, in the report released on Tuesday.
Alexander says these shifts have created the "perfect storm" for unprecedented price growth.
"Many Canadians suffered serious financial setbacks due to widespread job loss and lockdowns, largely across the service sector. Meanwhile, those who were able to transition to remote work environments saved an unprecedented amount of money last year," says Alexander.
Coupled with rock bottom interest rates and a general rush on larger suburban and rural homes, these financial savings inspired many Canadians to invest in real estate (a good chunk for the first time!)
"The problem is that new listings are falling short of demand, and these tight market conditions across Canada are causing serious buyer fatigue," says Alexander.
"Demand is driving up prices, and as I've always maintained, a national housing strategy is sorely needed to boost supply and ease the housing crunch."
There aren't enough detached listings to meet demand, and that demand is expected to grow as vaccination efforts continue, and businesses and borders reopen.— RE/MAX Canada (@REMAXca) March 9, 2021
Is there a solution? One RE/MAX Executive says the solution is to boost housing supply. https://t.co/nmIjo3NpFI
The Liberal government's official National Housing Strategy seeks to invest more than $70 billion over the next 10 years to "build stronger communities and help Canadians across the country access a safe, affordable home."
Alexander, like many market analysts, expects to see demand for homes in Toronto continue to flourish for the foreseeable future, pushing up prices beyond what most families would be able or advised to invest.
"With more people being vaccinated and immigration expected to pick up over the next three years, there's no relief in sight without adding more housing supply to the Canadian housing market," he says.
As for what's next, RE/MAX predicts that balance will be restored on the market (to a degree) when homeowners feel more confident listing their homes in a post COVID-19 world.
"The Toronto housing market is experiencing a shortage of single-family detached listing inventory, while the condominium segment is flooded with supply," notes the report. "Widespread vaccinations and eventual immunity will help."
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