Toronto homebuyers are finding fewer options to choose from this year as sellers have retreated from the market following the new mortgage “stress test” launched by the Office of the Superintendent of Financial Institutions (OSFI).
It could be that sellers are worried they won’t get the price they want for their house. This is especially true for single detached homes, where prices are down 8.2% when compared to a year ago. It’d be hard to stomach getting less for your beloved home than your neighbour did 12 months ago.
7,834 homes were sold in the Greater Toronto Area in May, according to the latest numbers from the Toronto Real Estate Board (TREB). That’s 22.2% less than the nearly 10,200 homes that were sold in May 2017, when the GTA’s housing bubble was beginning to show signs of bursting.
As previously noted, the drop in sales this year can be partly explained by OSFI’s stress test rules, which make it harder for potential homebuyers to qualify for a mortgage from a Canadian bank.
But, the stress test doesn’t tell the whole story. GTA home prices, while down 6.6% in May 2018 compared to May 2017 — the average price last month sat at $805,320 — are actually up 1.1% compared to April 2018. The average price looks at all types of homes, including detached, condos and townhomes.
The supply of resale homes on the market has been steadily dropping this year.
Compared to April 2018, the number of home listings in the GTA dropped by more than a quarter in May 2018 (26.2%). Because both listings and demand for homes have dropped in tandem, competition among those who are still looking to buy remains fierce: this small contingent of buyers is competing over a still-smaller number of available homes.
A recent Canadian Centre for Economic Analysis study commissioned by TREB estimates that there are more than five million extra rooms in the GTA that could be — but are currently not being — used as bedrooms. These rooms are located in homes that are too large for their owners, but many owners are reluctant to list their homes for sale because they do not believe there are suitable alternative homes for them to downsize into.
“Policy makers need to focus more on the 'missing middle' — home types that bridge the gap between detached houses and condominium apartments,” said Tim Syrianos, TREB President.
On Monday, TREB released the results of a poll conducted by Ipsos Public Affairs which found that the majority of GTA residents (56%) want government policies to focus on both increasing housing supplies and reducing demand in the city.
25% of those surveyed rank housing affordability in their top two concerns for the upcoming provincial election.