Higher down payment requirements appear to have little effect
The latest mortgage rule changes have failed to slow the blistering pace of home sales, according to numbers released Friday and they may have actually pushed prices higher in parts of the GTA that are still considered affordable, realtors say.
The Toronto Real Estate Board (TREB) said 8,547 homes were sold in the Greater Toronto Area through the Multiple Listing Service last month. That's up 16.5 per cent from last November. Prices also marched higher with the average selling price up by 22.7 per cent to $776,684.
That's despite new federal rules that took effect in October requiring buyers to have a larger down payment on houses priced over $500,000.
"I think for the most part (the rule change) has been digested," said Whitby-based realtor Paul St. Aubin. "A lot of people who were very, very close to purchasing — it's now pushed them back a year or two or they have to look a little further out."
He said that's led to a more dramatic rise in prices outside of the city of Toronto, from Milton in the west to Oshawa in the east.
In Whitby, the average home price is now well above the $500,000 threshold at $624,409. In fact, Durham Region had the biggest year-over-year price increase in the GTA with a 25.4 per cent spike reflecting its relative affordability and access to downtown.
"The (new) rules did not take out a lot of investors who are the ones coming in and bidding aggressively. They are looking for long-term growth whereas the everyday resident just wants to get into the market," said St. Aubin, who added that investors have noticed infrastructure improvements east of Toronto, such as the expansion of Highway 407 and planned improvements to the Lakeshore East GO train corridor.
"When you are looking for an area to invest in there are three things you look for, and the Durham Region has all of them: infrastructure improvements, a higher than national average income and population growth," he said.
Once again across the region a lack of listings was the main driver behind the price jump, according to Toronto Real Estate Board President Larry Cerqua.
"Would-be home buyers continued to be frustrated by the lack of listings, as annual sales growth once again outstripped growth in new listings. Seller's market conditions translated into robust rates of price growth," Cerqua said.
And changes in federal mortgage rules did nothing to address the lack of supply, according to TREB's director of market analysis Jason Mercer.
"Recent policy initiatives seeking to address strong home price growth have focused on demand. Going forward, more emphasis needs to be placed on solutions to alleviate the lack of inventory for all home types, especially in the low-rise market segments," said Mercer.
While TREB's numbers did not reflect new home sales and prices, Michelle Noble of the Greater Toronto Homebuilders' Association said inventory continues to drop as new developments are held up by red tape,
"We've been raising the challenges around supply side for years," said Noble. "A lot of it comes down to the amount of land available that's serviced and development ready."
Noble said while there were areas slated for development they lack such infrastructure as hydro, water and sewer systems.
"Plus, the amount of time it takes to get projects approved and ready to go ... is going up," said Noble, who said buyers are paying more and getting less..
"We are seeing increases in prices and smaller units."