Toronto homebuyers blame population growth for soaring housing prices
By Newinhomes on Jun 25, 2019
Housing prices are considered high in the Greater Toronto Area, and many of the professionals in the industry blame the lack of supply. Turns out that’s not how homebuyers see it.
This month, the Canada Mortgage and Housing Corporation released its latest Housing Market Insight, which shared and analysis of the results of its Homebuyers’ Motivations Survey (conducted in fall 2018). Homebuyers in Toronto, Vancouver, and Montreal were surveyed.
Regarding price growth, Toronto homebuyers expected the 12-month average from 2017 to 2018 to be 5%. The actual change from September 2017 to September 2018 was 4%. From 2018 to 2019, 4% growth is expected again. So when it comes to price growth expectations, Toronto buyers are pretty much on the dot.
Can’t say the same for Vancouver, where buyers expected 10% growth and actually saw 1%. In Montreal, buyers were surprised when they expected 4% growth and got a 7% increase.
When it comes to taking risks with a home purchase, 72% of Toronto buyers said they are not willing to take a risk. These buyers also had a higher frequency of purchasing for less than their allotted budget. This could explain the drop in bidding wars. Last year, 45% of buyers in Toronto participated in a bidding war, compared to 55% in 2017. Those aged 35 and under got into more bidding wars than any other age group.
The most interesting part of the survey results to us is the list of factors that homebuyers believe to be influencing housing prices. According to roughly 65% of Toronto buyers, population growth is a strong influence on housing prices. City attractiveness was the second highest with nearly 60% listing it as a strong influence.
Other housing price influences include interest rates (48%), foreign investors (47%), land scarcity (44%), domestic investors (43%), and employment growth (23%). (Percentages approximate, based off graph).
It’s interesting that employment growth would be so low on the list because people can only qualify for a mortgage and afford a home with a job. If more people are working, then there are more people looking to buy a home.
It’s also interesting (but not exactly shocking) that more Toronto buyers believed foreign investors impacted housing prices more than domestic investors. In the GTA, foreign investment has made up less than 2% of total purchases since April 2017, so there are definitely more domestic investors buying for the purpose of flipping or renting.
Without a doubt, population growth is a key factor influencing housing prices, which does translate to low supply, and the only way to keep up with the rising population is to build more homes.
