By Brad Stewart, Project Manager, AGC Glass
Toronto’s real estate community gathered at the offices of McMillan LLP on June 26, 2017 to review the latest statistics for residential real estate transactions and metrics and to hear from a panel of experts for an assessment of the impacts of Ontario’s Fair Housing legislation. McMillan’s offices offered a beautiful view of the city skyline, which seemed fitting given the skyline’s plethora of condos and their relevance to the topic of discussion.
The panelists who participated in the event were:
Phong Ngo – Director, National New Homes Research, Data Solutions: Altus Group
Cherise Burda – Executive Director, Ryerson City Building Institute
Daryl Chong – President & CEO, Greater Toronto Apartment Association
Tim Hudak – CEO, Ontario Real Estate Association
Neil Rodgers – President Ontario Home Builders’ Association & EVP, Acquisitions, Tribute Communities
Ontario’s Fair Housing Plan, first announced on April 20, 2017, attempts to curb the flurry of activity and rising prices widely reported in the GTA’s housing and condo markets. The Wynne government introduced a variety of measures which it says will lead to more stable pricing and reduced speculation in the real estate sector.
The measures introduced include the following:
- Actions to address demand: Nonresident tax
- Expansion of rent control to include buildings built after 1991
- Actions to increase land supply: Vacancy tax
- Protecting home buyers: paper flipping, end double ending, increased reporting requirements
- Improving regional growth plans with municipalities
The three major themes touched on during the opening presentation and throughout the panel discussion were the supply of housing and condo stock, impact of rent control, and pricing moving forward.
The event began with Altus Group’s Phong Ngo presenting a summary of real estate trends and analysis from the previous year, as well as real estate data collected following passage of the Fair Housing Plan. Ngo noted that real estate sales in the GTA have been steadily increasing over the last decade with 47,200 total new home sales in 2016, 28% more than the 10-year average. One of the consequences of this sales growth has been that the supply of housing stock has not kept pace with demand. He noted that the supply of unsold homes in the GTA at the end of Q1 2017 was fewer than 950 homes, less than one month’s supply based on a monthly average, and fewer than 1,000 units for the first time. OREA’s Tim Hudak that supply was a significant challenge in the market, citing demand from Millennials moving out of their parents’ homes along with significant immigration into the GTA. Demand has not be adequately satisfied, though Hudak acknowledged that the Fair Housing Plan has created a temporary pause, tilting short-term favour towards buyers. Similar legislation in Vancouver only had a short term impact. Hudak also expressed that further improvements to the approval process were required to ensure greater supply in the market.
The Greater Toronto Apartment Association’s Daryl Chong, as a representative from the rental side of the market, expressed a great concern with the impact that the Fair Housing Plan would have on available supply of rental units going forward. Chong described how rent controls passed in previous decades had very noticeable impacts on the available supply, especially in Toronto, and that only with the exemption of condominiums and buildings built post-1991 was there a noticeable improvement in the rental stock. Chong relayed that prior to the announcement of new legislation in April, 29,000 units of purpose-built rental were in various stages of proposal. His view was that these were now in danger as a result of the legislation. Neil Rodgers referenced a specific case where Tribute Communities had been slated to build three purpose-built rental towers along Sheppard. He indicated that the first building would remain a purpose-built rental but that the legislation would significantly impact the roll out and that future builds would have to be reevaluated, likely with longer lease up periods and higher rents at the outset in anticipation of capped rental growth rates going forward.
Rising house and condo prices, having been a big topic of discussion in Toronto and the GTA for nearly a decade now was a key concern throughout the panel discussion. Ryerson’s Cherise Burda pointed out that the Fair Housing legislation only has one tool that attempts to address demand. The non-resident buyers tax included in the legislation, similar to the foreign buyers tax introduced in Vancouver, was seen by most of the panel as not overly impactful. Rodgers noted that only 5% to 7% of sales are estimated to involve foreign buyers, making up a very limited percentage of the market. The market dynamics between Toronto and Vancouver were also seen as very different as most foreign buyers in Toronto are investors and rent controls may have already dissuaded them from future purchases.
Hudak was quick to point out that the looming election in 2018 will likely mean that regulations around real estate will be revisited closer to that date. In the meantime this pause will hopefully give the government and regulators time to evaluate the impacts of the legislation passed to date and decide what actions need to be taken to bring longer term stability to the marketplace.
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