Little if anything needs to be said in regard to the fact that supply deficiencies are the primary factor in house prices being as high as they are in Canada. Demand far exceeds supply, and that is unlikely to change anytime in the foreseeable future. This does cause something of a dilemma for realtors working in the profession as on the one hand homes selling for more mean higher commissions, but on the other fewer homes on the market and higher prices mean fewer willing and / or qualified buyers out there to obtain as clients.
One of the things that has more recently been determined is that it is not only the lack of housing that is making prices go up significantly, but it’s also that there’s not enough of certain types of housing that allow the market to function as it had for decades with what has been called a ‘property ladder’ – those who can’t find what the want / need stay put and what would typically be freed up for the 1st time homebuyers isn’t freed up at all.
This can also make it difficult for realtors new to the business to work with 1st time homebuyers who would like very much to get on that ladder, but can’t. However, our online real estate lead generator here at Real Estate Leads is an excellent way to counter the trend and be more directly put in touch with people who are in fact still willing and able to make a move in the local real estate market.
Back on topic though, let’s use this week’s entry here to dig deeper into the lack of housing options that are a part of the dysfunctionality of the housing market in Canada currently.
There aren’t enough homes for sale in the Greater Toronto Area (GTA) and Metro Vancouver to satisfy demand, and that’s helping to push prices even higher.
Homes Sales Down – Buyers Can’t Find What They Want?
Let’s start with Toronto. The TRREB reported home sales were down 6.9% for October compared to the same month last year. You might remember that October 2020 delivered a record for home sales and October 2021 was runner-up. Sales were up 8.1% from the previous month. The board also reported a decline in low-rise home sales was offset by a double-digit increase in condo sales.
The number of new listings compared to last year is down by almost one-third, and that’s keeping prices elevated. The overarching belief among the board and realtors working in the city is that the only sustainable way to address housing affordability in the GTA is to address the ongoing mismatch between demand and supply.
Prospective homebuyers – like ones with growing young families – are not going to see an affordable condominium as an alternative if they need space in the home for their children. No matter how affordable it may be, it doesn’t fit their needs and the options they require aren’t there.
Vancouver Mirrors
The exact same scenario exists in Vancouver, with sales way down from last year’s frenzied pace in the West Coast city. The REBG reports that 5.2% fewer homes changed hands in October year over year, but during that time overall sales were up 11% over that same time period. In the same way as it is in Toronto a double-digit increase in condo sales offset a decline in low-rise sales, but we can safely assume that many would-be buyers didn’t even get in touch with a realtor because the type of home they want (and can even afford) simply isn’t available to them in the city at this time.
Let’s keep in mind as well that the MLS Home Price Index for Vancovuer was up 14.7% year over year in October and 1.1% compared to September 2021. Then add the fact new listings were down 27.3% year over year and we can make that connection that prospective buyers not buying homes because the majority of the ones on the market and within their budget aren’t the type of home that would make sense for them to ‘move up’ the property ladder.
This lack of suitable inventory for homes is something that needs to be taken into consideration too when decision makers in municipal governments talk about promoting more new housing starts. Simply building large numbers of condominiums is still going to leave certain types of buyers with specific prerogatives without a realistic home to buy.
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