An Economic Outlook for the Greater Toronto and Hamilton Area (GTHA) and What it Means for Housing Affordability
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“Promoting Better Urban Policy through Economic Understanding”
An Economic Outlook for the Greater Toronto and
Hamilton Area (GTHA) and What it Means for Housing
Affordability
Highlights of a Study Conducted by The Centre for Urban Research and Land
Development, Ryerson University
Presentation by:
Frank A. Clayton, Ph.D.
Senior Research Fellow
To: Toronto Regional Real Estate Board
February 6, 2020
1Purpose of Study
Research Questions:
• How is the economic backdrop changing in the GTHA and what
does that mean for average household incomes?
• What are the implications for housing affordability?
Research Scope:
• Time Period: Current to 2031
• Geography: The Greater Toronto and Hamilton Area
Approximated by the Toronto, Hamilton and the Oshawa CMAs
• Focus on average households
2Study Conclusions
• The GTHA economy to create many high-income paying jobs, esp. in finance
and tech;
• Average household incomes to rise 3-4% per year;
• Average home prices and rents to rise 4-5% per year;
• Overall affordability will continue to decline as new housing supply lags
demand; and
• Main supply obstacle: an excessively restrictive land-use planning system.
3The GTHA Economy: Great Recent Run,
with More Moderate, but Still Robust
Growth in the Future
Past and Future Average Annual Employment Gains by CMA,
• Economic activity significantly
GTHA, 2002-2031F
outpaced the rest of Canada;
Toronto CMA Oshawa CMA Hamilton CMA • The job market was booming in the
100
last five years;
80 • The tech industry has taken off, also
Jobs (000s)
60 having positive spin-offs for other
40
industries; and
• Immigration spiked in 2018 and
20
2019.
0
2002-2009
2010-2014
2014-2019
2020-2025F
2026-2031F
Source: CUR, based on data from the City of Toronto and Statistics Canada.
4The Economy Is Shifting to More Higher-Paying
Office-Related Jobs
Past and Future Average Annual Employment Gains by Industry, GTHA, 2010-2031F
2010-2014 2014-2019 2020-2031F
Transport and Warehousing
Other Population-Related Services
Public Administration
Education and Health
Commodities
Construction
Wholesale and Retail
Manufacturing
PST*
FIRE**
-1 1 3 5 7 9 11 13 15 17 19 21
Jobs (000s)
Source: CUR based on Statistics Canada data. *PST =Profesional, Scientific and Technical. **FIRE=Finance, Insurance and Real Estate
5Aging Millennials and More High-Paying Jobs
Bodes Well for Average Household Income
Past and Future Average Household Income*, GTHA**, 2003-2031F
180,000
155,040
160,000
140,000 126,062
120,000
102,500
$
100,000
80,687
80,000 74,573
60,000
40,000
20,000
-
2003 2010 2017 2024F 2031F
Source: CUR, based on Statistics Canada data. *Household income in 2017 constant dollars was adjusted by CPI for the CMA. **Approximated by Toronto CMA.
6New Housing Supply Still Not Keeping Pace
with Demand
Past and Future Average Annual Growth in Demographically Supported-Housing
Requirements, GTHA, 2006-2031F
70
Average Housing Starts 2006-2019
60
Households (1,000s)
50
40
30
20
10
-
2006-2016 2016-2021E 2021-2026F
Source: CUR, based on Statistics Canada data.
7Moving Beyond the Temporary Impact of Mortgage Regulations:
Existing Home Market Still Has Supply Pressures
MLS Sales-to-New Listings Ratio versus Home Price Growth, Greater Toronto Area, 1990-
2019
MLS Average Home Price MLS Sales-to-New Listings
% Change Ratio
20 0.8
15 0.7
10 0.6
5 0.5
0 0.4
-5 0.3
-10 0.2
1990 1994 1998 2002 2006 2010 2014 2018
Source: CUR, based on data from the Toronto Real Estate Board.
8There Has Been a Rise in the Rental
Supply Hitting the Market, but Supply
Pressures Remain
Average Vacancy Rates in Purpose-Built Rentals and Rental Condos*, GTHA, as of
October, 2007-2019
3.5
3.0
Indicates balanced market
2.5
2.0
%
1.5
1.0
0.5
0.0
2007 2010 2013 2016 2019
Source: CUR, based on CMHC data. *Reflects a weighted average of purpose built rentals and private condos in Toronto, Oshawa and Hamilton CMAs.
9Sizable Rental Supply in the Future,
including Rental Condos
Housing Units Under Construction by Market and by Dwelling Type, Toronto
CMA, as of December 2019
45
40
35
Units (1,000)
30
25
20
15
10
5
0
Rentals* Ownership
Source: CUR, based on CMHC data. *Assumes 50% of all condos under construction in the Toronto CMA will be rented out. Ground-related=semis, singles and townhouses.
*Assumes 50% of all condos under construction in Toronto will be rented out.
10Metrics of Ownership Affordability to
Continue to Climb…
Past and Future Home Purchase Affordability* in the GTHA**, 2002-2031F
60
% of Average Household Income
50
40
30
Forecast
20
10
-
1990 1997 2004 2011 2018 2025F
Source: CUR, based on TREB and Statistics Canada data. *Costs reflect the average monthly payment needed to buy an average priced home with 20% down and a 5-year fixed mortgage rate.
**GTHA is approximated by the Greater Toronto Area (GTA).
11…as Will Rental Affordability Metrics
Past and Future Average Rent-to-Average Household Income Ratio, GTHA, 2002-
2031F
Average rent on occupied purpose-built rentals and rental condo apartments*
% of Average Household Income
Average asking rent on a MLS-listed 1-bedroom condo
35
30
25
20
15
Forecast
10
5
-
2002 2009 2016 2023F 2030F
Source: CUR, based on data from TREB, Statistics Canada and CMHC.*Reflects average rents for purpose-built rentals and condos purchased by individual investors for rental purposes.
12How to Get More New Housing Supply
• Making the provision of housing the number one goal of the land-use planning
system;
• Encouraging and incentivizing secondary suites in single-detached homes;
• Ensuring municipalities maintain a sufficient inventory of developable sites by
unit type to accommodate housing demand as required by provincial regulation;
• Re-zoning residential neighbourhoods and lower priority employment lands to
allow for more “missing middle” housing; and
• Speeding up development around major transit stations currently surrounded
by low-density areas.
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