Citing the need for Toronto's housing industry to "stop working in silos" and start working together to address the area's shelter needs, the Toronto Real Estate Board has launched an initiative involving all stakeholders in government, the private sector and not-for-profit organizations.
The first results were on display recently when TREB released its first annual report at an event in Toronto. In addition to providing detailed statistics about the state of the resale and new home markets in the area, new polling information about consumers' housing intentions was released.
The report also has 32 submissions about what the area known as the Greater Golden Horseshoe (GGH) -- which includes a large piece of Southern Ontario from Niagara to Orillia to Peterborough -- needs to do to address housing needs now and in the future. Not surprisingly, aging infrastructure, a need for improved public transit and affordable housing solutions were at the top of almost everyone's list.
The GGH is home to about nine million people, or one in four Canadians.
The area is in the midst of a housing and real estate boom that has lasted for more than a decade, taking just a brief breather during the 2008 recession. The real estate board had a record 101,299 transactions in 2015 and prices rose by 9.8 per cent compared to 2014. The lack of single detached home listings pushed the average price of a detached home in the City of Toronto to more than $1 million.
Economist Benjamin Tal of CIBC World Markets told the gathering that during a recent trip to Boston, he found "people in the United States are convinced that we are the poster children for a housing bubble."
Tal said the No. 1 threat to Toronto's real estate market is perception, saying that a housing crash could become reality if the industry doesn't fight back and explain to the public how economic fundamentals are continuing to support the market.
"Everyone knows we have a high debt-to-income ratio, but that number doesn't tell you much," says Tal. "Nobody is asking you to pay off your mortgage in one year."
He says that comparing Toronto's current real estate situation to what happened in the U.S. prior to that country's housing crash "is not only wrong, it's irresponsible."
TREB is forecasting that 2016 could see even stronger sales than 2015, but will at least check in as the second-strongest year ever for sales. Recent moves by the federal government to tighten the qualification rules for insured mortgages will have little impact on the Toronto market, says the board.
Bryan Tuckey, CEO of the Building Industry and Land Development Association (BILD), said the GGH is expected to grow by more than 100,000 people annually, to 13.5 million by 2014. He said that means 36,000 new homes must be built every year.
Provincial policies passed 10 years to mandate intensification have created a structural shift in the market. "A decade ago, low-rise types of homes, including detached and semi-detached houses and townhouses, accounted for the majority of new home construction. In 2015, the picture was vastly different, with units in high-rise developments comprising more than 80 per cent of new housing stock," says BILD in the report. It has also increased the percentage of high-rise condominium sales in the resale market, from 37 per cent in 2006 to 47 per cent in 2015.
"The new home industry's adaptation to these provincial policies has resulted in the region growing up and not out. Yet, in both the new home and resale markets, demand has remained strong for low-rise homes. The market is challenged by unmet demand because consumers can only buy what exists and what is available for purchase at pre-construction," says BILD.
This has driven up the prices. The price gap between low-rise and high-rise homes is now about $350,000 and growing.
George Carras, founder of RealNet Canada, told the TREB event that while prices for new low-rise homes have more than doubled in the last 10 years, condo builders have been able keep prices lower by building smaller units. Carras says the average condo in the Toronto area is now 140 square feet smaller than it was a decade ago. That's a 10 X 14-foot room.
Tuckey said the builders' challenges include dealing with long delays to get building plans approved and outdated zoning bylaws that are sometimes at odds with other government policies. One of the report submissions, by the Residential Construction Council of Ontario, says there are 45 different government entities that have a direct role in the process of getting a new home constructed.
Tuckey said that taxes and fees account for an average of one-fifth of the cost of a new home.
Dealing with people in local neighbourhoods who are opposed to development of any kind is also a major hurtle. He says the provincial government should be supporting its policies with education and promotion.
John DiMichele, TREB CEO, says, "There are a lot of smart people who responded to our call for stakeholder submissions or who contributed to the sections of this report and it would be great to get them in one room where they could discuss these issues collectively. We need to realize that we all have a stake in the outcome and it's time for us to work together to ensure today's opportunity becomes tomorrow's reality."