The problems of runaway house prices in Toronto

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We need the facts about the extent to which foreign buyers are driving up real estate prices in Toronto.

It’s time for the federal and provincial governments to collect the necessary data on the sale of housing to foreign-based buyers.

Without reliable data and figures, it’s impossible to set policy, protect the dream of home ownership for Canadians and avoid a potential real estate bubble and subsequent marketplace retrenchment in Toronto that could impact the entire Canadian economy.

 

What we do know is that the dream of buying a home in Toronto, and throughout much of the GTA, has become so expensive, that many people, especially the young, will never see that dream become a reality.

The housing market, most notably in Toronto but now spreading to Hamilton and other metropolis, has discovered real estate prices run sky high.

The Toronto Real Estate Board predicts 110,000 homes will be sold in 2017, with the average cost surging to $825,000.

The Canadian Mortgage and Housing Corporation says it’s concerned about galloping housing prices.

“We continue to detect strong evidence of problematic conditions in Canada” wrote Bob Dugan, the CMHC’s chief economist.

 

“Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home cost growing may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support.”

Not surprisingly, many in the real estate industry do not crave a tax on foreign-based buyers.

Tim Hudak, CEO of the Ontario Real Estate Association, says the lack of housing supplying is the main reason behind surging prices in and around Toronto, not foreign buyers.

The Toronto Real Estate Board commissioned research studies by Ipsos which reported less than 5% of home marketings in Toronto was set to foreign buyers.

But other reports paint a different picture.

 

Vancouver has consistently led the Canadian real estate market.

However in 2016, the British Columbia government introduced a tax on foreign customers who purchased real estate in Vancouver.

Bank of Montreal economists have studied the market trends in Vancouver and Toronto since the B.C. tax was implemented.

“We have enough history now to distinguish the clear divergence between Vancouver( down) and Toronto( still straight up ),” wrote Douglas Porter, the BMO’s chief economist

It seems clear some foreign-based customers who previously invested in Vancouver real estate are now buying in Toronto (or Victoria).

One real estate agent in Toronto who told me 11 of the last 15 houses he sold in 2016 was bought by foreign-based buyers.

He said they were either investments or the purchaser craved a home for their children to go to high school, which is included in the costs of property taxes.

 

To be sure, many factors are driving house prices to all-time highs aside from foreign customers, including low mortgage rates and low unemployment.

What is unclear is the path forward to make sure our children can render their own homes.

We also need to ensure the housing marketplace have continued attract new immigrants who, rather than speculating in Canadian real estate, want to move here to become both citizens and to live, study and pay taxes.

It is past time for our government to act to prevent foreign concerns from overheating the Toronto real estate market, which could eventually harm the entire Canadian economy.

But first we need to know the facts and the facts, to this phase, have been sorely lacking.

Finding out what those facts are, before deciding what to do, is the responsibility of our governments.

 
Source: Toronto Sun

 

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