Report Suggests GTA Housing Market is Still in Trouble
Canada's housing market—particularly the Toronto and GTA market—has gotten widespread attention and although the country's overall economy is healthy and there's little evidence that an epic housing crash is on route, a recent report indicates that all is not entirely well in the real estate world.
A recent Canada Mortgage and Housing Corporation (CMHC) report says there's "strong evidence [that] overall problematic conditions continue for Canada, Toronto, Vancouver, Hamilton and Victoria."
According to the report, slow growth in the young adult population combined with a decrease in disposable income and escalating housing prices means the CMHC is standing by its proclamation that problematic conditions are present. The news, though not surprising, is worth taking into consideration, as the CMHC report acts as an "early warning system" for Canada's housing markets.
The report suggests that housing is suffering from overvaluation (meaning it's priced higher than it should be) in the Toronto and Hamilton areas.
"We've maintained Canada's overall rating at strong evidence of problematic conditions as we continue to see moderate overvaluation and price acceleration. In the first quarter of this year, Canada saw a positive, yet slow growth in the young adult population and a drop in disposable income in all regions except British Columbia," says Bob Dugan, chief economist, Canada Mortgage and Housing Corporation. "This gives less support to house prices, which picked up again in early 2017 after a period of decline in the back half of 2016."
While CMHC still sees problems in the market, the report indicates—as have other reports before it—that a semblance of balance is returning to the market. After the Ontario government introduced a number of measures (including a 15 per cent tax on foreign buyers and speculators), the market cooled.
Sales are down in the GTA, as are prices (although housing prices are still up year-over-year, to be clear).
The report's findings are far from surprising, as much ink has been spilled—rightfully so—about the disconnect between wages and housing costs. With detached homes sitting around the $1 million mark and condos creeping into $300-$400k territory, stagnant incomes have left homeowners—particularly younger ones—concerningly overleveraged. Should cash-strapped homeowners (typically meaning those who spend 30 per cent or more of their earnings on housing) face a crisis (a job loss or any other significant financial set back), their chances of being able to stay afloat without help are limited.
And while most people understand why there's a problem, not everyone knows why, exactly, houses have become so expensive so quickly.
"We continue to see strong evidence of problematic conditions in Toronto's housing market," says Dana Senagama, principal market analyst (Toronto), CMHC. "Economic fundamentals like income and population growth cannot fully explain the rapid growth in house prices in Toronto."
- One Person Hospitalized Following Shooting in Brampton
- Brampton Conservative Candidate Under Fire for Homophobic Comments
- A Major Mobility Development Is Underway In Brampton
- Here's How a Brampton Company is Helping NASA Lead Future Space Missions
- Peel Police Looking For 29-Year-Old Woman With Outstanding Charges