The Toronto housing market is one of the most unaffordable housing markets in the country, and it appears as if prices will continue to rise in 2017. This housing bubble in Canada is putting substantial pressure on people who are desperate to find housing — and little is being done to change it.
The Canada Mortgage and Housing Corporation (CMHC) keeps track of all the Canadian housing markets and releases alerts when the cost of housing in a given city is increasing at a faster rate than the rate of average income. In October 2016, CHMC put the entire country on its first ever red alert, mostly due to the spill-over effects of Toronto and Vancouver’s housing markets. Vancouver has taken steps to cool their market by implementing a foreign buyer tax, but Toronto has yet to implement any great changes. Frankly, Toronto is in hot water and without government intervention soon, housing will rise an extra 10 to 16 per cent this year.
In December 2016, an average house in Toronto was $730,432 and if the averages were to rise to the anticipated 2017 levels, a home could become a whopping $825,000. This prices most people out of the market, and leaves many without an option of a permanent residence. The Royal Bank of Canada completed a Canadian Housing Health Check for 2017, and highly recommended the government step in to cool off Toronto’s housing market. Nothing has been done as of yet.
Recently, the City of Toronto road toll proposal was abolished by the Ontario Liberals, under the leadership of Premier Kathleen Wynne, which leaves the municipal housing market as one of the only ways for Toronto to make money for city needs. This puts the already-pressured housing market in a frightening position, as higher taxes in the form of a proposed harmonized land transfer tax or increased property taxes would raise costs even further within the Toronto boundary. Toronto Real Estate Board (TREB) released research on Tuesday emphasizing that any added tax pressure to the city’s market would push up prices in the GHTA further because the tax wouldn’t be in these boundaries. It could also impact the rental market negatively.
In order to afford a house, co-buying is growing in popularity, as people come together to buy a home. Though mortgage companies are stricter when it comes to co-buying with non-family members, putting funds into one large pot is a creative solution to being able to purchase a home. It also fosters a shared sense of community and lowers the burden of financing a home with an over-inflated price.
The housing bubble will eventually pop and it will have devastating consequences on homeowners if interest rates sky-rocket. There is a lot of danger in having high home prices and low interest rates, including selling to people who can’t realistically afford what they are purchasing. Instead of continuing the upward housing cost trend, the government needs to intervene and cool the market. People deserve a home and places like Toronto and Vancouver should be accessible to all, not just the select few. The city may benefit off housing in the short-term, but an inflated market will have nasty side-effects and affordable housing needs to become a central priority on a municipal, provincial and federal level.