Is Toronto’s resale market about to become even more unaffordable?

The Toronto Real Estate Board (TREB) released its resale housing market figures for December 2016, announcing that 2016 was the second consecutive year of record high sales in the Greater Toronto Area (GTA).

Last December, there were 5,338 sales reported through the MLS, which is a year-over-year increase of 8.6%. In total, there were 113,133 real estate transactions in the GTA last year, which is an 11.8% increase compared to 2015. The strongest sales growth was of condos and detached homes.

“A relatively strong regional economy, low unemployment and very low borrowing costs kept the demand for ownership housing strong in the GTA, as the region’s population continued to grow in 2016,” says TREB President Larry Cerqua.

“It is important to point out that the strong demand that we experienced in 2016 was very much domestic in nature,” Cerqua continues. “TREB recently commissioned Ipsos to survey its Members with regard to the level and type of foreign buying activity within the Greater Toronto Area. The results of the Ipsos survey suggest that the level of foreign buying activity is low in the GTA. Only an estimated 4.9% of GTA transactions, in which TREB Members acted on behalf of a buyer, involved a foreign purchaser. In the City of Toronto, the share of foreign buyers was 5%.”

On January 31, 2016, TREB will release the full results of the commissioned Ipsos survey, as well as its Market Year in Review, Outlook Report, and a comprehensive media event with a panel of industry experts.

The overall average selling price for 2016 was $729,922, which is 17.3% higher than 2015. In December, the average selling price jumped 20%.

“Price growth accelerated throughout 2016 as the supply of listings remained very constrained,” explains Jason Mercer, TREB’s Director of Market Analysis. “Active listings at the end of December were at their lowest point in a decade-and-a-half. Total new listings for 2016 were down by almost 4%. In 2016, we saw policy changes and policy debates pointed at the demand side of the market. If we want to see a sustained moderation in the pace of price growth, what we really need is more policy focus on issues impacting the lack of homes available for sale.”

TREB also expresses concern of the potential increase of the Land Transfer Tax that the City of Toronto Budget Committee in discussing. The potential increase will equal an extra $750 to the average priced home in the GTA. That’s another 7% to the $11,000 already being paid, which is in addition to the $12,000 that goes to the province.

“The last thing people need is to dish out another $750, on top of the $11,000 that they already pay City Hall,” Cerqua says. “The City should be looking for ways to make housing affordability better, not worse, especially for first-time buyers who could go backwards, or at best, be no better off. The Budget Committee should stop this proposal in its tracks and instead enhance the rebate for first-time buyers.”

The rebate for first-time buyers was already raised to $4,000, but it’s hard to argue against giving first-time buyers an even bigger break on Land Transfer Tax, given the affordability issue in Toronto.

With no sign of supply meeting demand and talks of a higher Land Transfer Tax, it seems like some people’s dreams of home ownership may not come true this year.