Huge housing prices in southern Ontario latest headache for Wynne government
Real estate market soaring not only in Toronto, but in Hamilton, KW, Windsor, London, Barrie
House prices are skyrocketing in cities across southern Ontario, and it's posing a big dilemma for Premier Kathleen Wynne, her finance minister and her government.
New statistics show the average sales price in the Greater Toronto Area last month exceeded $916,000, a 33 per cent jump from March of 2016.
But house price insanity is no longer just a Toronto thing. Figures compiled by CBC Toronto from local real estate boards show the price of the average home has jumped more than 20 per cent in the past year in seven other urban areas.
These increases are sharp enough and widespread enough that many voters may actually stop talking about how high their hydro bills are. But before the Wynne Liberals breathe a sigh of relief over that prospect, they're struggling to figure out what to do in response.
- Toronto-area home prices shoot upward 33% in one year
- Developers blame soaring home prices on limited supply of low-rise housing
"Exactly which lever should we be pulling to cool this market down? And can we do it in a responsible way?" Wynne mused at a recent news conference.
"The danger in this policy area is that of unintended consequences, so you make a move in one area and something else pops up," Wynne added.
It's without a doubt a tricky situation, both politically and economically.
Provincial governments have few tools to control something as free-market-oriented as the price of houses. They can't jack up interest rates, they don't control capital gains taxes.
So far, the province's only move was to boost its land-transfer-tax rebate for first-time home buyers, a change that saves the purchaser no more than $2,000. That's about how much the price of the average home in Toronto rises every four days.
'No silver bullet' to cool market
Finance Minister Charles Sousa is promising a "suite" of affordability measures in his budget (still no date set, but it won't be before the week of April 24). What those measures will be is anybody's guess. Sousa might not even know yet.
"How do we deal with it is an issue that we have to still resolve," Sousa told reporters Wednesday. "There is no silver bullet here. There's no consensus among the stakeholders and others as to what to do next."
He's certainly getting plenty of advice, some of it contradictory. Some blame the problem on investors snapping up homes, foreign buyers, a shortage of low-rise houses, a lack of available land or some combination of all of them.
The one thing that is clear to Sousa: the soaring prices are "becoming problematic so we have to take steps to try to resolve it."
While Wynne and her government want to be credited for taking action on what some are calling a crisis in housing affordability, they don't want to be blamed for precipitating a crash in house prices either.
The double-edged sword of the real-estate boom must have the Liberals feeling they can't catch a break.
Will voters punish Liberals?
On the one hand, the surging prices reflect surging demand, a sign that the economy is actually ticking along quite nicely. That's something the Liberals have been hoping Ontarians would notice, potentially to boost Wynne's dismal poll numbers.
On the other hand, the surging prices likely has many young voters and ordinary workers despairing that they'll never be able to buy a home, adding to their sense that life is just too unaffordable, and they could take out their frustrations on the Liberals at the polls.
You can't go to a barbecue or a cocktail party without somebody talking about real estate.- Tim Hudak, Ontario Real Estate Association
Don't underestimate the political impact of these house price jumps — and whatever happens to prices in the coming year — on the election in June 2018.
"You can't go to a barbecue or a cocktail party without somebody talking about real estate," said Tim Hudak, CEO of the Ontario Real Estate Association.
The Toronto Real Estate Board's "affordability indicator" has hit a level not seen for 25 years. TREB calculates that mortgage payments on the average GTA home (assuming a 20 per cent down payment), plus property taxes and utilities, would eat up 45 per cent of the average household income. That figure is on a steep incline that eerily parallels its sharp rise during the real estate bubble of the late 1980s.
Remember that, shortly after that bubble burst in 1990, voters dumped David Peterson's Liberal government in favour of Bob Rae and the NDP.