Toronto’s sizzling real estate market has been great for sellers but not so much for buyers and it’s only getting worse.
A new report from RBC has found Toronto is where the cost of home ownership has gone up the most and that has caused its housing affordability index to decline, exceeding Vancouver for the first time in two years.
“There’s a lot more demand relative to supply,” said RBC senior economist Robert Hogue. “New listings are down relative to a year ago a lot of buyers having fewer properties available for sale.”
The Building Industry and Land Development Association says the Greater Toronto Area’s supply of newly constructed homes last month hit its second-lowest level since it began tracking that data about 15 years ago.
The group says there were 15,184 new homes in builders’ inventories last month – about half of the 31,150 that existed exactly 10 years ago.
The shortage of housing units available to buy – especially fully detached, single-family houses – is one factor behind soaring real estate prices.
“People want to buy houses. People value home ownership, that’s what our Ontario Real Estate Association surveys tell us and despite prices going up, they want to get into the market,” says OREA CEO Tim Hudak.
“I think the solution to help out with the high prices, get taxes down not up and increase housing supply.”
Vancouver’s housing market has long been the country’s most expensive. However, prices have started to cool and some analysts point to the recent introduction of taxes on foreign investors.
Hudak says he’s against implementing a similar tax in Ontario to try and cool things down, focusing instead on other local issues.
“The land transfer tax in Toronto is a killer,” says the former MPP and provincial PC leader.
“People value home ownership and they want to get into the market and own a home. I think the worst thing we can do is bring in a brand new tax that will actually cause the market to go down.”
The Bank of Canada also issued a warning, saying that while high debt loads and rising home prices are manageable, a shakeup – such as a recession that would lead to unemployment – could mean loan defaults and that could affect the larger economy as a whole.