There is a housing affordability crisis in Toronto, according to CIBC economists, Benjamin Tal and Katherine Judge, whose latest report focuses on reshaping the future of housing in the big city.
“To the naked eye, things are still okay. Debt-service ratios are not climbing, mortgage delinquency rates are near record low and older Torontonians, in fact, have accelerated their debt payments. But behind the scenes, we are starting to see some cracks,” the pair wrote in the report, entitled, The GTA Housing Market: Is There Logic Behind the Madness? “
For new mortgages, amortization periods are starting to rise, mortgage qualification criteria are becoming a bit more flexible, and there is some evidence of increased borrowing to finance down payments.
“A lot of this activity is happening in a less or non-regulated space. This has resulted in a transfer of risk from the regulated segment of the market to the unregulated segment—not exactly a zero sum game.”
To combat this, Tal and Judge provided policy suggestions that could minimize risk in the housing market.
Those including upping the minimum down payment on homes valued between $500,000 and $1 million more than 10%; increasing the qualification rate for five-year fixed rate loans; and more closely monitoring the alternative lending space.
“None of the above measures will be a game changer for the GTA. They will help at the margin,” the pair wrote. “For a real and lasting change, the market must adjust to reflect today’s elevated valuations more appropriately.”
To read the entire report, click here
Leading economists have laid out policy suggestions that could rein in housing prices in one of Canada’s hottest markets.