CIBC Says, “It’s Time To Build Apartments”.
Distinguished economist Benjamin Tal says that rentals “must be part of the solution” to the GTA housing problem:
- GTA is not a normally functioning market due to a history of legislation failure, as well as a severe lack of land ;
- House prices, while always on the rise in the GTA, have followed a “predictable path” until 2016, when the average-home price increase spiked by 17.3% and is currently at over 20%;
- Unexpectedly, condo prices followed suit to almost parity, rising by 16% in the fourth quarter of 2016;
- Contrary to the perception that there are “too many condos”, condo sales increased by an record 34%, while the supply was down by 6%;
- The demand for housing in the GTA is not only strong, but “stronger than perceived” due to “undercounting of the number of non-permanent residents”;
- Government intervention to prevent the house prices to grow at this rate, such as foreign tax policy and new mortgage rules do not make a significant difference in an atypical market such as GTA.
Deputy Chief Economist
CIBC World Markets Inc.[/TS_VCSC_Advanced_Textblock]
- An increase of supply of rental units is desperately needed in the GTA for a “real and lasting change”;
- GTA’s rental market has “never been hotter” with average rent rising by a record of almost 12% in 2016 ad 52% of the leases were above the $2.75 per square foot;
- The new wave of renters (young families) will need “stability of long-term renting”;
- For builders in the 416 area, the gap between the profitability of condos and profitability of purpose-build is very narrow; on surplus land, it makes even more sense to favour purpose-built;
- Incentives from the government on new rental projects will make the difference between an “affordable and an unaffordable GTA housing market”: expediting the approval process for purpose-built projects, allowing higher intensification rates and cutting the HST will ultimately encourage builders to complete purpose-built projects before a full-blown affordability crisis.
New Apartment Construction is Already Working
*Dip in 2017 is due to unit numbers yet to be announced.*[/TS_VCSC_Advanced_Textblock]
Recently Built Apartment Buildings in the GTA
Approx. 24,000 Units