If you are interested in real estate at all and have been following the news, then you know that a lot has been said about the rapid rise in prices of residential housing in both British Columbia and Ontario over the last few years.
Last summer, after average Vancouver house prices rose 32% year over year, the provincial government stepped in and introduced some new rules and taxes in their bid to cool the real estate market. So far, the imposition of a 15% foreign buyers tax by the BC government and levies on vacant homes (among other measures) appears to be having the desired impact. Sales in March 2017 declined by 31.5% when compared to last year.
Currently, the real estate market in Ontario (particularly Toronto and surrounding environs) look very much like the Vancouver market was several months ago before government intervention. Average home prices in the Greater Toronto Area (GTA) increased by over 33% in March 2017 compared to the same period a year ago, with average house prices reaching $916, 567. This upward movement in price activity in Toronto also pushed the average Canadian home price to a record high of $548,517 (up 8.2% y/y) in March.
Ontario’s Plan to Cool Real Estate Prices
The Ontario government introduced a 16-point plan on April 20, 2017, to cool down skyrocketing real estate prices. Some of the measures introduced include:
⇒ A 15% “Non-Resident Speculation Tax”
Real estate buyers in Ontario’s Greater Golden Horse Shoe area (including the GTA, Hamilton, Barrie, Niagara and Kitchener-Waterloo) will now be subject to a 15% tax if they are not Canadian citizens or permanent residents. The hope is that this will deter foreign speculators from driving prices up.
⇒ Rent Control
Rent control was expanded to all private rental units in Ontario. This will limit increases in rent to a provincial posted rate that is published annually.
⇒ Vacant Home Property Tax
Municipalities can now impose a vacant home tax on owners of empty homes with the hopes that it will spur owners to either sell or rent such properties out.
⇒ Encourage Construction of New Rental Apartment Buildings
There is a plan to spur the building of new rental apartment buildings by offering rebates.
⇒ Review Real Estate Agent Rules
The government plans to review rules and regulations governing the activities of real estate agents in order to ensure that the home buyers are well-protected.
There are a few other plans being put in place by the Ontario government including making more land available for affordable housing, educating the public on their rights, and much more.
What to Expect
If the impact of the new rules introduced in British Columbia last summer is anything to go by, we can expect that the new measures put in place for Ontario will probably slow-down house prices in the province for a little while.
In the long-run, however, until supply rises to meet demand and/or interest rates rise significantly, I see house prices in Vancouver and Toronto continuing to spike and then some.