Toronto’s housing market posted a record year in 2016 that saw double-digit price gains, tightening supply and the cost of an average home surpass $700,000 for the first time ever.

Sales figures released by the Toronto Real Estate Board (TREB) show the city’s realtors sold $82.6 billion worth of homes in 2016, an increase of almost $20 billion from 2015. The strongest annual rate of sales growth in 2016 was experienced for condominium apartments followed by detached homes.Unit sales rose 12 per cent and prices increased by more than $100,000 to an average of $729,922. That’s up 17 per cent from last year -- the largest annual gain since 1989.

"A relatively strong regional economy, low unemployment and very low borrowing costs kept the demand for ownership housing strong in the GTA, as the region's population continued to grow in 2016,'' TREB president Larry Cerqua said in a statement. “It is important to point out that the strong demand that we experienced in 2016 was very much domestic in nature. TREB recently commissioned Ipsos to survey its Members with regard to the level and type of foreign buying activity within the Greater Toronto Area. The results of the Ipsos survey suggest that the level of foreign buying activity is low in the GTA.  Only an estimated 4.9 per cent of GTA transactions, in which TREB Members acted on behalf of a buyer, involved a foreign purchaser. In the City of Toronto, the share of foreign buyers was five per cent.”

Active listings at the end of December were down 48 per cent from a year earlier, and were at their lowest levels in 15 years. There were 5,338 residential sales transactions in December, including condo units and fully detached houses. This represents an 8.6 per cent increase from a year ago, making it one of the best Decembers on record. The average home price for the GTA in December was $730,472, up 20 per cent from December 2015.

“Price growth accelerated throughout 2016 as the supply of listings remained very constrained.  Active listings at the end of December were at their lowest point in a decade-and-a-half.  Total new listings for 2016 were down by almost four per cent.  In 2016, we saw policy changes and policy debates pointed at the demand side of the market.  If we want to see a sustained moderation in the pace of price growth, what we really need is more policy focus on issues impacting the lack of homes available for sale,” said Jason Mercer, TREB’s Director of Market Analysis.

The report also mentions that more than 3,000 homes sold were valued at more than $2 million, almost double the number sold in 2015. 19,318 homes sold last year were at values upward of $1 million, which accounted for 17 per cent of all homes sold. 32 per cent of all detached homes last year sold fore more than $1 million.

“If we want to see a sustained moderation in the pace of price growth, what we really need is more policy focus on issues impacting the lack of homes available for sale,” Jason Mercer, TREB’s director of market analysis, said in a statement.

The data underscore how Canada’s largest city has defied all attempts by government officials to slow a housing boom that is both a major engine of growth and a source of intense worry. Soaring costs are fueling household indebtedness and homes are becoming unaffordable to many, which could pose a risk to financial stability if the market corrects suddenly. Toronto home prices, which have doubled over the past decade and tripled since 2000, may show little moderation without steps to address a shortage of homes, the realtor group said in the statement.

With continued strong rates of price growth, housing affordability is a growing concern. The City of Toronto’s Budget Committee is considering an increase to the Land Transfer Tax that could see buyers pay another $750 to the City, which would represent a seven per cent increase to the $11,000 that they already pay City Hall as an upfront Land Transfer Tax closing cost. This would be on top of the $12,000 that is also paid to the province. First-time buyers could end up paying $475 more, or, at best, be no better off, even though the province recently doubled their first-time buyer LTT rebate.

“The last thing people need is to dish out another $750, on top of the $11,000 that they already pay City Hall. The City should be looking for ways to make housing affordability better, not worse, especially for first-time buyers who could go backwards, or at best, be no better off,” said Mr. Cerqua. “The Budget Committee should stop this proposal in its tracks and instead enhance the rebate for first-time buyers.”

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