It’s well known that the GTA has been in a housing bubble for years, but in a new report from RE/MAX, it’s said that the area is in a full-fledged housing affordability crisis.
“Housing bubble? I prefer the term ‘affordability crisis,” said RE/MAX Chief Strategy Officer and Executive Vice President Christopher Alexander. “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.”
Alexander attributes this crisis to a “perfect storm of factors” that have built up over the past year, including low levels of inventory, skyrocketing demand, historically low-interest rates, and higher household savings.
These combined factors have caused GTA real estate prices to soar, with sales going up 52.5% year-over-year in February, and the average selling price surpassing $1 million for the first time ever. While this was happening, sales continually outpaced the amount of new supply coming onto the market.
“We’ve experienced some unexpected market shifts in the wake of COVID-19,” Alexander said. “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.”
With vaccines starting to roll out to the general population in Ontario and immigration expected to start picking back up, the RE/MAX report predicts that there will be “no relief in sight without adding more housing supply to the Canadian housing market.”
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Toronto in particular, the report says, has long been the hottest housing market in Canada, so the real estate growth in the city isn’t entirely surprising. The popularity of the suburbs, however, only really heated up during the pandemic as homebuyers found new “flexibility due to remote work arrangements,” which allowed them to look outside of the city’s core.
Going forward, Alexander sees the lack of GTA supply becoming an even more prevalent issue in the affordability of the housing market. The Toronto market in particular, although flooded with condo listings, is experiencing a shortage of single-family detached homes for sale.
“The problem is that new listings are falling short of demand, and these tight market conditions across Canada are causing serious buyer fatigue,” he said. “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 is hope, however, that once the pandemic environment feels safer and current homeowners feel more confident listing the homes for sale, there will be an uptick in the amount of inventory available.