According to a recent study, Sydney, Australia’s home prices are the fastest growing in the world…except for in Toronto. That’s right, the study says Toronto price growth is the greatest out of all major cities (populations of 1 million or more).
While Sydney home prices grew 18.4% year-over-year, Toronto’s went up 19%. New York trailed with an 11.5% increase, followed by Hong Kong with a 10.8% increase and Tokyo’s 9.3% increase. It’s also worth mentioning that Vancouver was up there with a 14% home price increase!
Though Toronto’s price growth was somewhat greater than Sydney’s, the latter is still more unaffordable with the median home price equalling 12 times the average annual household income. The only area to outdo Sydney’s unaffordability was Hong Kong.
Both Hong Kong and Sydney blame land constraints and poor planning policies for their rapid home price increases. Sound familiar? Toronto’s new home industry also places much of the blame on provincial planning policies, time consuming approval processes, and a lack of developable land.
As of the end of February 2017, the average price of a new condo unit in the Greater Toronto Area (GTA) hit a record high of $523,086, according to the Building Industry and Land Development Association (BILD). The average price per square foot also hit a record high of $652. For new low-rise homes, the average price remained over $1 million, while detached homes are priced for nearly $1.5 million on average
There is a lack of inventory in both resale and new home markets. The lack of new listings in the resale market has pushed many buyers to buy new construction, which only applies more pressure on the struggling inventory numbers. Last month, there were only 1,001 new low-rise homes available across the GTA. Compare that to more than 17,000 homes a decade ago.
As prices continue to rise across the GTA, many potential solutions have been proposed. For example, would taxing foreign buyers make a difference like it did in British Columbia? Would increasing the capital gains tax prevent speculators from driving prices up? Does the percentage required for a deposit need to increase? There are so many ideas up in the air, but they all seem to do harm to a particular segment of the population.
The foreign buyers tax doesn’t seem to be a promising solution. In Sydney, they’re finding that foreign buyers are becoming less interested in investing partially because of the high prices. If foreign investors are thinking that about Sydney, they’re likely thinking that way about Toronto as well. As prices increase, it seems like foreign investment will level out on its own, so a new tax wouldn’t be necessary.
Perhaps Sydney will take steps to cool their housing market and Toronto can take some notes! What sorts of measures do you think need to be taken? How involved should the government be?
By Lucas | on March 30, 2017 |TorontoStar