Recent announcements by the Wynne government regarding housing in Ontario is sending mixed messages to the housing industry. Our primary challenge is Demand exceeding Supply so mimicking BC’s approach to the Vancouver housing situation does not address what is happening here.
For example, introducing a 15 per cent tax on foreign buyers may have been effective out west where they have a large percentage of this kind of purchaser, but our situation in the GTA is different. At Baker Real Estate Incorporated, we have tracked foreign buyer contact in all of our sites for several years, and our percentage is consistently approximately 5 per cent. Where the new regulations could make a difference is in Toronto’s luxury market – people who have discretionary income in the millions. Toronto is just now coming into its own as an international city that is attracting wealthy purchasers who own several homes around the world. If they want to purchase high-end homes here, whether as investments or to live in when they visit, a 15 per cent surcharge added could be a deterrent from buying.
The recent provincial announcements include bringing all rental units under Ontario’s rent control, which will likely harm both large and small investors in the rental market, and may keep new investors from entering it. Again, our situation in Toronto is different from Vancouver, in that our condominium vacancy is hovering at approximately 1 per cent (the lowest in many years). People have been investing in condominiums and providing badly needed rental stock, which is a good thing. Rent control might deter potential developers from building new apartment residences, resulting in an even tighter rental market. It might also keep existing landlords from making repairs and upgrades, as they require more funds to do so. In addition to large investors, rent control discriminates against landlords who own just a few units, as well as those who already have their rental units on the market. In the future, we will likely see fewer of these smaller investors, and those who do enter the market will simply set their initial rents as high as they can and ride that wave for as long as they keep the investment.
The Premier says she will bring in measures to encourage the building of new rental stock, as well as streamline the building of new homes and free up more land for development. We will see if that happens. I and many other real estate professionals continue to stress that our current housing situation is the result of demand exceeding supply – in both market and rental housing. Increasing the efficiency of government approvals, speeding up the process and flooding the market with new homes and condos – now that will bring down prices!