The Toronto real estate market has been on a tear in 2021. With the Canadian economy rebounding from the global health crisis, the Toronto housing sector continues to witness dramatic price growth month after month.

Despite the so-called exodus that started to make headline sin 2020, it seems people are returning to Toronto, stimulating tremendous demand for housing, whether it is a detached property or a condominium unit. But while demand is soaring, supply has failed to keep pace.

Supply of Toronto real estate has declined to concerning levels. Recent housing starts data, courtesy of Canada Mortgage and Housing Corporation (CMHC), has led to growing concerns that the affordability crisis impacting North America’s fourth-largest city will only escalate. But how low have inventory levels fallen? Let’s take a look at the numbers.

Inventory Levels in Toronto Real Estate Meet “Critical Juncture”

According to the Toronto Regional Real Estate Board (TRREB), the inventory of homes could not satisfy the level of demand seen in October. Residential sales enjoyed their second-highest level on record for the month of October, despite tumbling 6.9 per cent from the same time a year ago, with a total of 9,783 units.

The buying frenzy may have subsided slightly from last year, but average selling price for a residential property in Toronto swelled 19.3 per cent to $1,155,345.

TRREB figures show that new listings fell by 34.1 per cent to 11,740, while active residential listings declined 55.2 per cent to 7,750. In addition, new housing construction slowed in October from last year, as housing starts dropped 11.89 per cent year-over-year to 2,644. Year-to-date, housing starts were relatively unchanged, with 33,553 units, CMHC recently revealed.

By the end of the third quarter, the months of inventory across all property types fell to their lowest levels on record for the July-to-September period.

  • Single-Detached: 1 month
  • Semi-Detached: 0.6 months
  • Townhome: 0.8 months
  • Condominium: 1.5 months

This is an important metric for industry observers because it represents the number of months it would take to liquidate current inventory of listings at the present rate of sales activity.

“The tight market conditions across all market segments and areas of the GTA is testament to the broadening scope of economic recovery in the region and household confidence that this recovery will continue. A key part of future economic development in the GTA will be the ability to provide adequate ownership and rental housing supply so that people can continue to move to the region to live, work and spend money in the local economy,” said TRREB Chief Market Analyst Jason Mercer in a news release.

Housing Experts Demand Government Collaboration

In a real estate market like Toronto, what would foster more housing development and supply?

The Ontario Real Estate Association (OREA) recently published a report that suggested changes to “outdated zoning laws,” including allowing multiple types of developments in neighbourhoods that currently only allow for detached or semi-detached construction. So, for example, this would let companies produce multi-unit residential properties.

“In too many Ontario cities, it defies common sense that you can take a bungalow and turn it into a monster four-storey home for one wealthy family, but you cannot build affordable townhomes for multiple families without red tape, runaround and exorbitant costs,” said OREA CEO Tim Hudak. “Exclusionary zoning policies are at the heart of Ontario’s housing affordability crisis in high-growth areas and it’s time the Province steps in to modernize these archaic laws.”

Others are putting out a call-to-action for all three levels of government to cooperate and collaborate. Even before the federal election, real estate association leaders had been urging partnerships between the federal, provincial and municipal governments. By working together, industry experts purport, policymakers could facilitate an environment of more supply.

“The only sustainable way to address housing affordability in the GTA is to deal with the persistent mismatch between demand and supply. Demand isn’t going away,” said TRREB President Kevin Crigger in a statement. “And that’s why all three levels of government need to focus on supply. The federal government has stated that collaboration with provinces and municipalities is required. This collaboration could be spearheaded, at least in part, with housing-related incentives tied to federal infrastructure investment.”

Indeed, skyrocketing home prices are not expected to come down anytime soon. And, unlike the Toronto housing market in 2020, first-time homebuyers and young families will now need to compete with investors again.

Be it a detached house or a condominium, prices are soaring without any signs of abating. Should interest rates begin to rise next year without any decline in prices, it is going to be even more financially challenging to purchase a property in the Toronto real estate market.

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