Sousa promises measures to cool Ontario's overheated housing market
Attention hard-pressed homebuyers: Finance Minister Charles Sousa is promising help in his spring budget to make houses and condos more affordable.
Disappointed that last week’s federal fiscal blueprint didn’t take immediate steps to cool the GTA’s overheated market, Sousa said Monday that Ontario will go it alone in the fight against crazy bidding wars, fast-rising prices and rents.
“There is a suite of options, and we want to put a package together that meets that,” said Sousa, who would not be specific.
He has not yet announced a date for the budget — “it’s not complete, yet” — but it is expected within weeks.
The average price of a detached home in the Toronto market has nudged to more than $1.5 million.
This has heightened concerns that first-time buyers and young families cannot buy without taking on huge mortgages, thereby putting themselves at risk if interest rates spike.
Speculation has centred on a foreign-buyers’ tax, but Sousa has said any measures must avoid “unintended consequences” that could slow the housing market in areas outside Toronto and Hamilton where home sales aren’t as overheated.
The real estate industry has complained there isn’t enough new supply of homes coming on the market to keep prices in check, and this has resulted in bidding wars and fierce competition for rental accommodation.
“Demand is high for a number of factors,” Sousa said.
“Could be speculators. Could be people from outside the country. It could very well be the many who are now moving into Ontario, creating that demand,” he added.
“The degree of supply is in question and how to expedite that is also something we’re trying to address.”
In a report last week, TD Bank said prices are expected to rise between 20 per cent and 25 per cent this year, and “at roughly 3 per cent to 5 per cent in 2018.”
One thing Sousa cannot do in his budget is what he asked of the federal government: impose higher capital-gains taxes on the sale of homes that are not main residences.
Such a measure would hit speculators who buy and flip houses and condos for quick profits as prices skyrocket.
Sousa proposed raising the capital-gains inclusion rate from 50 per cent to limit the amount that the party flipping the property can pocket.
“That was one aspect that I thought should be considered,” said Sousa last week.
He maintained his hope that his federal counterpart, Bill Morneau, may take action at some point.
“I’m going to take solace in the fact that we’re having ongoing discussions with the federal government,” he added.
“We do need something soon, especially given the market conditions that we’re under.”
The federal government is keeping a closer eye on tax returns to make sure the capital-gains deduction for a principal residence is only allowed in appropriate cases.
Toronto Mayor John Tory has expressed concerns about the housing market, which is also driven by current low borrowing costs and the low inventory of homes, as many people choose to renovate their homes or add a second storey to them.
A report by Ryerson University’s City Building Institute earlier this month urged a foreign-buyers’ tax or a progressive property tax to cool the market.
“As housing bubbles are allowed to expand, many are hurt or drawn into unsustainable financial situations. This is particularly the case for young Torontonians,” the report cautioned.
“When housing bubbles unwind, there is major collateral damage, and people are hurt through little or no fault of their own. And the historical record is that they do unwind, essentially without fail.”
As bubbles burst, homeowners who overbid are left paying a mortgage on a home that can be worth tens or hundreds of thousands of dollars less than the amount they paid.
Source: The Star
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