TORONTO, November 28, 2013 - Home prices in the Greater Toronto Area (GTA) continue to rise, in part because of the limited supply of single-family homes in established neighbourhoods, according to Priced Out , a new report researched and written by the Pembina Institute and co-published by RBC.
The report indicates there is no shortage of land in the GTA to accommodate construction of single-family homes for a projected population growth of 44 per cent over the next 25 years. However, land available for development is predominantly located outside of the City of Toronto and other major centres of employment in the GTA.
For homebuyers wanting to live in established neighbourhoods within the GTA, the relative scarcity of affordable single-family homes has shifted purchasers to more affordable multi-unit dwellings such as condominiums. Dwellings with five or more stories accounted for 41 per cent of existing housing stock in Toronto in 2011, while single-family detached houses accounted for close to 25 per cent.
"Demand for single-family homes in established GTA neighbourhoods has outstripped supply, which is driving up prices in these areas," said Cherise Burda, Ontario policy director at the Pembina Institute. "Many homebuyers are faced with a choice between a condo in a walkable and transit-accessible neighbourhood, or a single-family home located in car-dependent location."
Other factors that have affected home prices include a strong economy, low interest rates and favourable mortgage rules. The report found no evidence that provincial land use policies, including the Greenbelt Plan and the Growth Plan for the Greater Golden Horseshoe, restrict housing development and contribute to rising home prices.
RBC Economics notes in the most recent Housing Trends and Affordability Report that the GTA housing market has staged quite a healthy comeback so far this year, despite affordability levels being slightly stretched.
"Housing affordability in the GTA remains much more manageable today than in 1990 after an overheated market and a surge in home prices in the late 1980s propelled the market into more challenging waters," said Robert Hogue, senior economist at RBC. "Comparatively speaking, condo ownership exerts less financial stress on homebuyers, which partly explains the strong buyer interest in condos in the past several years. Owning a single-family home at today's prices is a stretch for many homebuyers in Toronto and desirable suburban locations."
The Priced Out report is part of a series examining the factors that influence how we live in the city and suburbs. A 2012 report, the RBC-Pembina Home Location Study , found that more than 80 per cent of GTA residents would give up a large home and yard to live in a "location-efficient" neighbourhood that is transit-friendly, walkable and offers shorter commuting times. However, more than 70 per cent of residents in the GTA live where they do because of affordability rather than preference.
About the Pembina Institute
The Pembina Institute is a national non-profit think tank that advances sustainable energy solutions through research, education, consulting and advocacy. It promotes environmental, social and economic sustainability in the public interest by developing practical solutions for communities, individuals, governments and businesses. The Pembina Institute provides policy research leadership and education on climate change, energy issues, green economics, energy efficiency and conservation, renewable energy, and environmental governance.
RBC is the largest residential mortgage lender in Canada, helping thousands of Canadians reach their homeownership goals - whether they are buying their first home, planning their next move, renovating or managing their current home financing. In addition, RBC offers environmentally responsible products and services for clients, and promotes responsible lending as part of its commitment to environmental sustainability, detailed in the RBC Environmental Blueprint.
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For a complete copy of Priced Out , the report is available here.
For more information, please contact:
Ontario Policy Director, Pembina Institute
Communications Lead, Pembina Institute
Director, Brand and Communications, RBC