Lack of available housing supply continues to be the major challenge for affordability in the Greater Toronto Area (GTA), whether we’re talking about ownership or rental housing. This presents the real estate market with unique challenges. What are some ways to address them? On a recent episode of TRREB’s Ready to Real Estate podcast, host and TRREB Chief Market Analyst Jason Mercer talks with Peter Norman, Altus Group’s VP and Chief Economist. They discuss the critical need to increase housing supply in the region and some obstacles and opportunities inherent to the GTA housing market.
Immigration and temporary migration mean increased demand for housing
After a brief, pandemic-related freeze in 2020, immigration to the GTA picked up and continued to remain a strong driver for economic growth through 2021 and into 2022. Of course, housing is needed for newcomers to the country, driving further demand in the market. Peter points to an interesting trend in “migration” or long-term movement between countries: that the GTA is also a hub for temporary foreign skilled workers, for employment in the tech sector and others. Likewise, international students are returning after a pandemic-related halt.
As such, immigration and temporary migration also invites opportunities for the rental market. This in turn can have a knock-on effect for new home construction and investment, particularly in the condo space, which has been a major contributor to the GTA’s new rental supply over the last decade.
Condos are here to stay – and moving outside the metropolis
Through the first waves of the pandemic in early 2020, buyer preference swung heavily in the direction of low-rise homes, including detached and semi-detached houses and townhouses. The condo segment, on the other hand, was much slower to recover from the initial impact of the pandemic. The pandemic also brought about a lag in the supply of new condo apartments, caused by slower approvals at the municipal level and some uncertainty by developers.
New condo sales did pick up in 2021, with more than 12,000 units sold last year – on par with the pre-pandemic years 2018 and 2019. While this sales level was not as high as 2016 and 2017, there is continued interest and investment in the sector. This doesn’t just hold true for traditional condo development hubs like Toronto and Mississauga. Peter mentions that condos are “democratizing” and spreading to other regions of the GTA, including York, other parts of Peel, and Halton.
Finding the “missing middle” – not just for new home buyers
Jason brought up the missing middle: housing types that bridge the gap between traditional single-family homes and condominium apartments. These types include laneway housing, stacked townhomes, duplexes, walk-ups, and others. Peter adds that the policy environment has evolved and generally favours this type of housing, but that there are still hurdles to see missing middle housing developed on a large scale. Peter stresses that the development of this type of housing could free up more traditional housing currently owned by older homeowners who are underutilizing their space – for example, only using one or two bedrooms in a four-bedroom house – because they don’t have viable alternatives to move into.
For a more comprehensive insight into some of the supply challenges facing the GTA housing market as we head further into 2022, don’t miss Jason and Peter’s full conversation on their Ready to Real Estate episode.
