There is so much conflicting media coverage about the causes of high housing prices in Toronto and the GTA that many people are likely confused as to what to believe. The main question is whether the government should step in to cool our housing market.
In Vancouver, we saw what can happen if government actions are hasty and not well thought out. Yes, the 15 per cent tax on foreign buyers cooled the market, but so dramatically that it was harmful to existing owners. At Baker Real Estate Incorporated, the number of condos we see sold to foreign buyers is in the 5 per cent range, and most of those are end-users. In addition, we have a lot of speculators who are not foreign.
Why place so much emphasis on this segment, when our lack of supply compared to demand is the real culprit? Ironically, all three levels of government contribute to the housing shortage with regulatory red tape that is, in fact, holding back construction and creating the supply vs. demand dilemma. If the Ontario government is determined to intercede, it could lighten up on proposed amendments to the Ontario Places to Grow Act and The Greenbelt Plan that would in fact, make the housing affordability crisis even worse. We need more land approved for development, not less.
Demographics account for another factor in our housing shortage. Baby boomers are not selling their principal residences as much as was predicted, and they are reluctant to sell investment properties because of the substantial capital gains tax – and there is talk that the government may raise that tax. Again, this is counterproductive. During all of this, Millennials are looking for low-rise homes.
We are also reading suggestions that the amount of down payment required to buy a home should be raised, which would price even more first-time buyers out of the market. Cooling our housing market would result in a gouge on our economy, as the number of jobs in the new home industry is directly affected by the number of new housing starts. There should be prudent forethought before the government steps in to make any of this happen. Real estate in Toronto has long been undervalued on the world stage. We’re just starting to catch up. I say leave the market alone, and it will right itself.