Unaffordability has been associated with Toronto’s real estate market for the past few years, the culmination of which is the fewest new home sales in nearly two decades.
There were only slightly more than 25,000 new home sales recorded in the Greater Toronto Area last year, according to Altus Group, which says that is the lowest total in 18 years. The 21,330 new condo sales were down 38% last year, and single-family detached houses declined a whopping 50% with 3,841 sales.
The Building Industry and Land Development Association’s CEO says that indicates an imbalanced market and the government should seriously reconsider B-20. He also says that first-time homebuyers need relief.
“We join other industry groups in calling on the federal government to revisit the stress test and allow a longer amortization period for first-time buyers,” said David Wilkes. “And we look forward to working with our municipal partners on removing barriers to development, such as excessive red tape and outdated bylaws.”
A major reason for the downturn, according to the CEO of Canada Mortgage & Financial Group, is that policymakers have scared off international investors whose money the housing market and the Canadian economy rely upon heavily. While B-20 is the biggest culprit of the market’s downturn, tax amendments might help spark a healthy sales cycle, she added.
“Municipal powers need to allow for more building and cut that ridiculous Land Transfer Tax,” said Ameera Ameerullah. “The provincial government needs to get rid of the 15% head tax on foreign buyers, or at least reduce it to 5%. And, of course, ditch B-20 for conventional mortgages, and as for insured, bring the stress test down to .5%.”
It can be argued that the cost of real estate in the GTA isn’t especially prohibitive, but in tandem with a 200 basis point stress test, not to mention interest rate hikes, qualification has become arduous.
“There’s more of a qualifying issue, then there’s the rate increases and the insured rates, then there’s affordability and the supply shortage of real estate,” said Ameerullah. “The new rules obviously affected people and now we’re seeing a trend of people moving out of the city where they get bigger bang for their buck.”
However, most rankling to Ameerullah is watching borrowers at the mercy of their lenders.
“Borrowers with good track records with regards to their payments shouldn’t be penalized. They’re stuck with their current lenders who are making renewal offers at higher rates. These people are losing the option to secure better financing options.”