People often speculate on reasons why the real estate has ballooned so heavily in the last couple years in Toronto, and across Canada. Everything from foreign buyers to decreased land availability has been blamed, and Statistics Canada sheds further light on why the housing market is on high alert.
The newest 2016 census shows that Toronto alone has over 99,000 unoccupied homes in the city. These statistics results reflect that a lack of occupancy is a top housing issue in the city and is growing at the same rate as the rising price of real estate. Across Canada, the number of unoccupied homes as grown and is highest in Toronto, followed by Montreal. Vancouver is trailing in third, potentially in part due to the new foreign buyer bylaws that have come into effect.
By comparing the number of total private dwellings and the total private dwellings occupied in each city as collected in the census, it is easy to see there is an unusual difference between occupied homes and total dwellings available. In the last 10 years, the amount of unoccupied dwellings have also grown 10.5 per cent in Toronto, and the problem continues to worsen. It appears that the highest rate of non-occupancy is in the Concord area of Vaughan, which was at 35 per cent. Downtown Toronto also had more homes that weren’t being occupied, especially in the fashion district at King St. W, with 21 per cent not regularly occupied.
In this circumstance, blaming foreign buyers isn’t a viable reason because local Canadians are most often the residents to fill out the statistics report. Other factors could be AirBnB or short-term rentals to explain the unoccupied rentals, but it is becoming more clear that speculation is a big part of the reason. Homeowners are hanging onto their homes while the red hot real estate market is at its highest, and people are waiting until the city hits its peak price. These people are often known as ‘flippers’ and are unnecessarily preventing families in desperate need of housing from getting a much-needed house.
Having statistics available to highlight housing issues can provide answers to convoluted real estate issues that are often kept under wraps by stakeholders. By crunching numbers, it is easy to see why unoccupied homes are negatively contributing to the real estate bubble in the city. House flippers and speculators need to sell or rent unoccupied homes to people who need them, and housing must be made more affordable. Hopefully the government takes the necessary steps to crack down on unoccupied homes, and the real estate market can balance as a result.
Instead of implementing grand-sweeping changes in the hot housing market, Ontario will commit to helping first-time homebuyers who are struggling voraciously to purchase homes in Toronto.
Ontario will double the maximum Land Transfer Tax Refund to $4,000 for eligible first-time homebuyers as of January 1, 2017. This means there would be no Land Transfer Tax on the first $368,000 paid for a first-time home. This will help people who were unable to purchase a home due to rising property costs and taxes.
Along with lowering the rates for first-time homebuyers, Ontario has decided to raise the rates of one- or two-bedroom single-family residences over $2 million to 2.5 per cent. This would mean that home buyers in the over $2 million market would pay an extra $5000 on average, which is affordable for the many buyers in the upper echelon. The funds raised from the rate increases would be used to fund the first-time homebuyer’s initiative. The refund was announced as a part of the 2016 Ontario Economic Outlook and Fiscal Review.
The Land Transfer Tax Refund has been met with mixed reviews, many citing it as a soft approach to a larger issue. The housing market in Toronto has been in the hot zone for several months and creating more opportunities for first-time buyers does little to cool the market in the larger metropolitan centre. Though Vancouver’s foreign buyer’s incentive was a bit high-handed, the Land Transfer Tax Refund is the complete opposite and accomplishes very little.
The Land Transfer Tax will benefit first-time homeowners outside of Toronto due to inflated prices within the city boundaries. The average price for first-time homes outside of Greater Vancouver and Toronto is $361,000. Alternatively in Toronto, prices were 19 per cent higher than last year’s.
Though the refund will do little to help the heated markets in Toronto, any little bit to aid first-time homebuyers to compete in Toronto’s housing market is welcome. Even if the homebuyer will spend more than $365,000 to purchase in the city, a rebate on the Land Transfer Tax will help homeowners to save money initially and use it to keep up with hefty mortgage payments thereafter.
Helping first-time homebuyers and increasing taxes for wealthier homeowners is a smart move, but broader strokes from Ontario may be the only way to cool the Toronto housing market. Providing affordable housing and hitting density targets is also an important step, like looking into zoning bylaws at a municipal level and allowing for laneway housing. Housing is one of the most difficult files in Ontario’s fiscal review and the housing sector awaits with bated breath what future options the ministry considers.