“Still convinced that the city of Toronto needs to build more housing to bring down prices? It’s a growing city, and housing all these people is applying pressure to prices. Makes sense, but unfortunately there’s no data to support that,” Stephen Punwasi, Better Dwelling’s chief data nerd, wrote in a data analysis piece last week. “Actually, the data shows the opposite. Basic analysis shows the city might be overbuilding by over 40% for the current rate of growth.”
That argument directly contradicts what many in the industry are touting.
The Toronto Real Estate Board, for example, argues there are supply constraints in the city.
"The listing supply crunch we are experiencing in the GTA has undoubtedly led to the double-digit home price increases we are now experiencing on a sustained basis, both in the low-rise and high-rise market segments,” Jason Mercer, TREB's Director of Market Analysis, said in March. “Until we see a marked increase in the number of homes available for sale, expect very strong annual rates of price growth to continue."
That’s not the case, according to Better Dwelling.
The team argues population growth is slowing – from 9% in 2011 to 6.2% in 2016 – and that the number of people living in households has remained relatively steady.
But building has continued.
“Despite slower population growth in the last Census, building completions accelerated. From 2012 to 2016, Toronto CMA saw 175,825 homes completed,” Punwasi wrote. “This represents a 9.75% increase from the period prior. That’s a home for every 1.96 people that moved to the area, and 41% more than the average household size. That would have to be a pretty wide margin of error from all levels of government for there to be a ‘shortage’ of homes.”
So who will live in these homes?
According to Better Dwelling’s “robo-researcher,” one-third of homes listed for resale in Toronto have never been occupied. It also estimates nearly 100,000 homes sit vacant.
“This doesn’t mean that prices should necessarily come down. Commodities are worth what people are willing to pay for them,” Punwasi wrote. “It does mean that no amount of building will bring down prices without a change to buyer mentality. Great time to make money as a seller, bad time to be a young person trying to start out in this city.”
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