Photo: Flickr / Stewart Butterfield

Last year in August, British Columbia’s provincial government, in the face of incredibly inflated house costs, adopted a number of regulatory measures aimed to maintain some level of housing affordability for the Lower Mainland as well as Vancouver. In this regard, a foreign buyer tax was implemented, as well as price control measures and even vacancy restrictions. Toronto’s price trends soon began to mirror what occurred in Vancouver just a few months later, and in response, the Wynne administration in Ontario adopted a similar strategy as their provincial and municipal counterparts in the west coast. In addition, the federal government also decided to step in and implement even stricter borrowing standards and regulations in an effort to prevent Canadians from taking on even more debt because of what were effectively out-of-control housing costs.

Yet, despite all of these measures – some of which have actually affected more sections of the market than intended, a real estate analytical firm has reported that Toronto and Vancouver as well as their major metropolitan areas are only going to get more expensive to buy in the near future. When looking at price trends as well as sales volume data, it is clear that the measures aimed at ensuring housing affordability and slowing down price growth in Vancouver have lost their effectiveness. The average price of a single-family detached home in Vancouver is actually even higher than the record price it had posted previously, and now the average currently sits at $1.3 million.

In addition, while Toronto’s housing market as well as many of the high-demand regions in the Greater Toronto Area have seen a heavy reduction in housing prices currently on the market as well as overall sales volume, it is very possible that Toronto will simply follow the same pattern of market trends as what has happened in Vancouver.

According to the analytical firm, given that construction costs of new housing developments equal to up to half the final selling price, it argues that the only sure-fire way to prevent housing costs from rising in the future is to either lower construction costs or actually lower the prices of the actual land used for construction of new residential areas. Certainly, while regulatory measures can be useful, it is clear that they are only a temporary measure and sometimes, if they are not designed properly, they may actually affect more of the market than intended. 

Published Date: Sep 28 2017