With mortgage rates pushed to record lows due to the pandemic’s economic impact, Millennials are taking the opportunity to buy single-family suburban homes in the outer areas of the City of Toronto and surrounding GTA.
It’s a trend that researchers from Ryerson University’s Centre for Urban Research (CUR) say is weakening the condo market in the city’s denser urban areas, even as the region’s overall housing market saw record home sales volume in July and August.
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In a research note titled “Ground-related housing heats up while apartment market lags,” CUR’s Diana Petramala and Victoria Colantonio wrote that the resale market in the suburban “905” region broke sales records in August, with buyers showing “a higher preference for ground-related housing.”
Petramala and Colantonio noted that ground-related homes in the urban “416” also saw a sales boom in August, but the overall market underperformed due to the larger number of apartments in the city.
“The apartment market lagged all other housing types across the GTA,” the researchers said.
While there are many dynamics at play in this roller coaster ride of a market, Petramala and Colantonio said that a driving force behind the suburban surge and urban apartment weakness was rising Millennial demand for single-family homes.
“Never underestimate the power of Millennials to continue driving upside surprises in resale market activity, especially as very low interest rates have helped improve affordability,” wrote Petramala and Colantonio.
“As this generation moves out of apartments into ground-related housing, apartments are likely to remain a lagging segment of the real estate market,” they added.
The researchers went on to point out that this shift in home buying preferences to suburban markets and ground-related housing coincides with a significant change in the way short-term rentals are regulated in the City of Toronto.
The new short-term rental by-laws that came into effect last week prohibit homeowners from renting out their residences for more than 180 nights per year and limit rentals to owners’ principal residences.
The CUR researchers said these changes are expected to supply a large number of apartment units to the long-term rental market and resale market, adding another dimension to the substantial shifts already occurring in the apartment segment.