What's Driving Up Housing Prices in Halton?
or the past few years, the same question has been on almost every prospective home buyers’ lips: What’s driving up housing prices in Oakville, Burlington and Milton?
According to recent Bloomberg report, the blame—especially in relation to condos—might not lie at the feet of one of the usual suspects: investors/flippers.
“Condo flipping was never pervasive in the Vancouver and Toronto housing booms and that sliver of the market has faded over time, suggesting tougher measures to curb speculators won’t make those cities more affordable,” Bloomberg says in a recent article.
While this conclusion might confuse some, it’s not actually out of line with statements put forth by both real-estate companies and all levels of government.
Last spring, data emerged that confirmed what the Toronto Real Estate Board had been saying for some time—that speculators (which can refer to foreign or local investors buying up properties to “flip” them) aren’t the chief drivers of price increases.
The data also dispelled the notion that investors from outside of Canada were driving up house and condo prices in Toronto and the GTA.
The data, recently released by the Canada Mortgage and Housing Corporation (CMHC), indicates that the share of condos owned by non-residents remains low in the cities the corporation surveyed, with the majority reporting shares of less than one per cent.
Back in the spring, the CMHC also pointed out that non-resident ownership shares remained stable in Vancouver and Toronto—the two cities the Bloomberg reported concentrated on.
And although the Ontario government—then led by Kathleen Wynne—did manage to cool the market in the spring of 2017 by proposing a 15 per cent Non-Resident Speculation Tax (NRST) on foreign buyers and speculators, the new policy was met with skepticism by real estate organizations who claimed foreign ownership in major markets is actually pretty low—something recent data is supporting.
As for how many units are owned by non-residents in Toronto proper, data says the largest structures registered a non-resident ownership share of 4.2 per cent compared to the overall share of 2.5 per cent. As far as the overall GTA goes (which, of course, includes Mississauga), foreign ownership shares sit at 2.3 per cent.
Bloomberg’s numbers add credence to the evidence that flippers aren’t driving price increases.
According to the report, just 3.4 per cent of Vancouver condominiums sold between April and June were units that had already been sold over the previous year.
“The share of ‘paired sales; is close to the 2.9 per cent average over the last 12 months, and the rate has steadily declined from a decade ago when it topped 6 per cent,” the report reads.
Bloomberg says the proportion has also fallen in Toronto, where it was 1.7 per cent in the second quarter, down from five per cent before the global financial crisis of 2008.
So, what’s driving price growth in Toronto and the GTA?
Bloomberg says the problem is lacklustre housing supply, which has failed to keep pace with demand.
Bloomberg also points out that speculators are even less active in Toronto than they are in Vancouver.
In fact, the report says the flip rate for condos there peaked at just under four percent in April 2016. As Ontario announced new regulations on foreign buyers in April 2017, paired sales reached a record low of around 1.1 per cent, and in June of this year represented just 1.8 per cent of condo sales.
Condo flipping “has always been a very rare occurrence,” and even many short-term sales are influenced by a sudden job change, according to Christopher Alexander, regional director for Ontario at Re/Max Integra in Toronto. “Most people buy real estate to hang onto it for at least five to seven years.”
So, it looks like condos are getting more expensive because housing inventory is low and, put simply, the GTA is an in-demand living space.
Do you think the government is doing enough to cool the housing market in Halton?