Shortly after the Provincial government's introduction of the Fair Housing Plan for Ontario, a new report from the Toronto Real Estate Board (TREB) is showing the first signs of a cooldown for the region's hot housing market. While April 2017 saw a 33.6% year-over-year increase in new listings at 21,630, total sales declined by 3.2% in the same period. It isn't yet clear whether this year-over-year decline is directly correlated with the new Provincial policy, or if it instead can be attributed to fewer working days in April due to the date Easter fell on this year.

Toronto skyline, image by A Great Capture via Flickr

"The fact that we experienced extremely strong growth in new listings in April means that buyers benefitted from considerably more choice in the marketplace. It is too early to tell whether the increase in new listings was simply due to households reacting to the strong double-digit price growth reported over the past year or if some of the increase was also a reaction to the Ontario Government's recently announced Fair Housing Plan," said TREB President Larry Cerqua in a prepared statement.

This decline in sales was accompanied by the MLS Home Price Index Composite Benchmark Price increasing by 31.7% year-over-year in April 2017, while the average selling price for all home types jumped by 24.5% to $920,791 in the same period. Jason Mercer, TREB's Director of Market Analysis, calls these figures "encouraging," and expects to see more balanced market conditions develop if new listings continue to outpace sales growth.

Analyzing property assessment and land registry data, TREB's report presents statistics that are positioned to counter the theory that foreign buyers, speculation, and flipping are the primary factors in inflating home prices. This data shows that between January and April of this year, only approximately 7% homes were bought or sold within a year of the original transaction. At the same time, only 6.2% of properties are owned by purchasers that own multiple properties in the Greater Golden Horseshoe region, and less than 1% of buyers have mailing addresses outside of Canada. An Ipsos survey of TREB Members from last Fall estimated that only 4.9% of property transactions between the fall of 2015 and the fall of 2016 were sold to foreign buyers.

A report from real estate analysis firm Urbanation builds on TREB's report, placing focus on the GTA housing market's continued lack of new housing inventory, and a growing disparity between supply and demand. According to the Urbanation report, the inventory of unsold condos dropped to 6,481 units in Q1 2017, with a 61% annual decline bringing unsold inventory to the lowest levels recorded in the last decade and a half of the condo building boom.

Quarterly new condo sales and unsold inventory in the GTA 2010-2017, image via Urbanation

The first quarter of 2017 saw 9,932 new condo units sold in the GTA, a massive 73% year-over-year increase that represents a new quarterly high. The quantity of new condo units launched for pre-construction sales in Q1 2017 more than doubled, with 6,293 new units compared to 3,061 units launched during Q1 2016. At the current pace of sales, less than three months of housing inventory is available, and a substantial number of new launches will be needed to balance the growing supply-demand disparity. This is evidenced in the record number of units pre-sold during the quarter, rising to 94% from an 86% share in 2016's first quarter, and an 84% share the year before. The number of projects to sell out in Q1 2017 more than tripled from last year's figures, with 80 sold-out projects versus the 25 recorded in Q1 2016.

Urbanation's report diverges from the TREB narrative in regards to condominium flipping practices, noting an increase in resale activity within newly-built condo developments. The 1,059 re-sales recorded in Q1 2017 represent a 69% jump over the 625 units resold in Q1 2016, while 249 re-sale units were sold for the second time within the past year, a 53% growth from Q1 2016.

"The shortening of holding periods for some condo buyers is an outcome of the rapidly accelerating market," said Shaun Hildebrand, Urbanation’s Senior Vice President. "Although the share of short-term condo market participants still appears relatively low, it will be important to monitor the situation closely going forward as market conditions evolve," added Hildebrand.