You are here
Canada moves to pop Toronto housing bubble
[OTTAWA] Canada's Ontario province announced new rent controls and a 15 per cent tax on home purchases by non-resident foreigners on Thursday to try to cool a searing hot Toronto-area real estate market.
They are among 16 measures targeting real estate speculation and affordability concerns in the city and surrounding communities that are home to about 10 million people, or nearly a third of Canada's population.
"People are betting that our future is going to be bright," Ontario Premier Kathleen Wynne told a news conference. "And that's why they are coming here." "But when speculation drives the average resale price of a home up by 33 per cent in just 12 months, that's when we know we have a problem," she added. "When young people cannot afford their own apartment or cannot imagine owning their own home, we know we have a problem... and we know we have to act." In the last year, residential real estate prices in the Toronto area jumped 33.2 percent to Can$916,567 (S$950,270), pushing home ownership beyond the reach of most Canadians.
Average rents went up 11 per cent, while the vacancy rate fell to a 12-year low of 1.3 per cent.
Wynne said the plan is to "encourage more supply of new homes, discourage speculators and protect renters from becoming the victims of our growing economy." Rents for apartments built before 1991 in the region are already regulated. Under the new regime, rent increases will now be limited to 1.5-2.5 per cent annually - roughly the rate of inflation - for all rental units.
The government will spend some Can$125 million on building new rental units after a decades-long lull in new construction. Government lands will also be opened up to development and builders will receive tax incentives for the construction of apartments.
Although Canadians have expressed concern over rising home costs for years, governments have been hesitant to take actions that might harm existing homeowners whose biggest lifetime investment is the equity in their homes.
Ontario's move comes after Ottawa tried to rein in the market by tightening mortgage requirements and closing tax loopholes used by speculators, and after British Columbia imposed a 15 per cent foreign buyers tax on Vancouver-area homes.
The latter led to a cooling of the Vancouver market after the average price for a detached single-family house reached a record high of Can$1.5 million in May 2016.