'The hype was crazy': In Toronto's real estate lottery, the winners pity the losers
'I'm kind of sad for the people that are looking for a house,' says homeowner who just sold
If real estate is a lottery draw, Toronto-area homeowner Marni Blouin won the jackpot.
Blouin and her husband purchased their modest detached home in Scarborough, Ont., 12 years ago for $238,000. In early April, they listed it for sale at $629,000, after hearing about the scorching-hot market that has boosted Toronto home prices by nearly 30 per cent annually.
"When it was actually getting ready to be listed at the beginning of April, I couldn't even watch the news because the hype was crazy," said Blouin.
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They received an offer for $850,000 the very same day the listing was posted on MLS, and soon sold the home for $875,000. Blouin said she and her husband were shocked, but also thrilled.
"It felt really good," she said. "We knew we would get good money, but we didn't think it would yield that much at this point."
No major new measures
A Tuesday meeting between federal Finance Minister Bill Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory focused on how to rein in the economic forces that have jacked up the value of homes like Blouin's.
The three leaders didn't announce any major new actions to reporters gathered after the summit.
Morneau said Ottawa has agreed to help the province and city with economic analysis, instruct the Canada Revenue Agency to devote more resources to combating tax avoidance in the real estate sector, and use the Financial Transactions and Reports Analysis Centre of Canada to "ensure compliance" with laws targeting money laundering.
"Short-term, we've agreed to refrain from introducing new measures for buyers which would impact housing prices in the GTA by boosting demand," said Morneau.
Morneau's provincial counterpart Charles Sousa said his government would announce "a suite of measures designed to increase supply and address demand" next week. The provincial budget will be unveiled on Thursday, April 27.
Multiple theories on price hikes
The problem is, nobody knows exactly what's driving the price increases, said Scotiabank chief economist Jean-Francois Perrault. Wealthy foreign buyers, house-flipping speculators, and a lack of supply caused by restrictive government development policies have all been blamed by various commentators.
Perrault said a tax on foreign buyers, like the 15 per cent property transfer tax in Metro Vancouver last year, would likely be ineffective in Toronto. Although Vancouver's foreign buyer tax "might have had an impact over a short period of time," he said the sparse data on foreign buyers in Toronto suggests there simply aren't as many foreign buyers in Canada's biggest city.
Tsur Somerville, who studies real estate as an associate professor at UBC's Sauder School of Business, said Vancouver's foreign buyer tax "psychologically acted to break things down and slow things down," and reassured Vancouverites that their government was listening to their concerns.
"I think trying to actually say that it had a causal effect is a lot more problematic, mainly because the market here started declining in advance of the tax," he said.
Scotiabank's Perrault has called instead for a house flipping tax, using the existing system of land transfer taxes to target speculators. The tax would be applied to sellers who have only owned a home for a short period of time, and the tax rate would shrink as homeowners hold the home for longer.
"So the idea is, you make speculating a little bit more expensive, but you also have to recognize at the same time that speculation plays an important role and you don't want to kill it completely," said Perrault.
'A full spectrum of solutions'
Taxes on speculators or foreign buyers might help, said Sean Speer, a Munk senior fellow at the Macdonald-Laurier Institute, but he said it wouldn't address what he sees as the root cause of the problem: a lack of supply, rather than a surplus of demand.
"I think that municipal politicians and provincial politicians need to look at the extent to which their own policies, particularly around zoning and development, are affecting the city's housing affordability challenges," he said.
"We have people steering the car in the direction of addressing the demand problems, and then other voices driving in the other direction to deal with supply," said Speer. "The truth is we need a full spectrum of solutions."
Blouin said she's happy for herself, but is worried about how Toronto's inflated housing market will impact young people like her 30-year-old son.
"As much as I like the money, I'm kind of sad for the people that are looking for a house, really," she said.
With files from Jacqueline Hansen, Robert Parker, and Shawn Benjamin