What’s behind Toronto’s escalating house prices?

TORONTO — The average selling price of all homes in the Greater Toronto Area skyrocketed last month, climbing 33.2 per cent from a year ago to $916,567. The latest data from the Toronto Real Estate Board comes as policy-makers mull potential measures to slow the rapid pace of price growth. Here are some of the factors believed to be playing a role in the upwards trajectory of house prices in Canada’s largest city:

Immigration: The arrival of newcomers to the city is a frequently cited reason for rising prices. Roughly 120,000 people immigrated from outside of Canada into Ontario from July 1, 2015, to June 30, 2016, according to Statistics Canada, with a sizable portion of them landing in the Toronto area. “Toronto is a magnet for both other Canadians and for people from other countries, and it’s the economic engine of the entire country,” says Dianne Usher, senior vice-president at Johnston and Daniel, a division of Royal LePage.

Lack of supply: One of the culprits often fingered for soaring prices in the Greater Toronto Area is the lack of developable land. In 2005, the Ontario government introduced the Places to Grow Act, a piece of legislation aimed at protecting the Greenbelt and curbing urban sprawl. However, the legislation is often also blamed for escalating real estate prices, as some argue there isn’t enough land to build homes.

Usher says the two land transfer taxes that Torontonians have to pay have also discouraged many from selling their homes, further exacerbating the supply problem. “It’s stopping people from moving up,” says Usher. “They’re renovating and adding on instead of moving.”

Low interest rates: Borrowing rates have been hovering near record lows for nearly a decade, making mortgages attractive and propelling buyers into the market. “Low interest rates clearly have been a very significant factor,” says CIBC economist Benjamin Tal. However, the degree to which interest rates are fuelling the housing market may be diminishing, says Tal. “When interest rates are very low for a long period of time, they lose their effectiveness,” he says.

Foreign buyers: Ontario Finance Minister Charles Sousa has floated the idea of implementing a tax on foreign buyers similar to the one implemented in Vancouver last year. But whether or not foreign money is playing a significant role in Toronto remains a point of contention. “We don’t have the data to determine the volume of foreign buyers,” says Usher. The influx of foreign cash into the Toronto market may have increased, says Tal, as some investors who were eyeing Vancouver may have opted to avoid the 15 per cent tax in that city.

Speculators: Speculative investing — purchasing a home in the hopes of turning a profit, rather than to live in — has been in the spotlight lately as one possible explanation for accelerating home prices. Tal says the steep rise in prices over the course of 2016 and early 2017 suggests that something beyond the usual supply and demand factors is at play. “If you look at the trajectory of house prices in the GTA, until 2016 it was robust but it was predictable,” says Tal. ”Then, over the past year, we started seeing prices rising on a year-over-year basis by more than 30 per cent. You cannot have 30 per cent increase in prices without some speculative activity happening.”

Just Posted

WATCH: Families make yo-yos and weaved yarn at Red Deer Museum and Art Gallery

It was all about making yo-yos and yarn bombing at Red Deer… Continue reading

Solve mysteries with Sherlock Holmes and Dr. Watson in Red Deer

At three sold-out one act Sherlock Holmes plays in Red Deer, theatre… Continue reading

Quebec man arrested in slaying of Alberta woman 16 years ago

AIRDRIE, Alta. — A Quebec man has been arrested in the slaying… Continue reading

Construction underway at Medicine River Wildlife Centre in Red Deer

The new building is twice the size of the old one

Fish for free

No license is required to ice fish on Family Day weekend

WATCH Replay Red Deer Feb. 18: Your weekly news highlights

Watch news from Red Deer and Central Alberta

How to keep local news visible in your Facebook feed

Facebook has changed the news feed to emphasize personal connections. You might see less news.

Trump gets angry about election meddling, but not at Russia

‘Weirdest thing’: Trump expresses anger, but not over Russian election-meddling

New doping charge could hurt Russia’s chance at reinstatement

Russia could lose its chance to be reinstated before the end of the Winter Olympics because of a doping charge against curling bronze medallist Alexander Krushelnitsky.

#Metoo movement causing confusion in many men, fear of missteps with women: experts

Being painted by the same sweeping brush as those alleged to have mistreated women has angered men

Virtue and Moir break their own world record

Virtue and Moir break short dance record to sit first in ice dance at Olympics

Calgary man dies in Mexico following sudden illness

Troy Black was with his wife, Lindsay, in Puerto Vallarta when he began vomiting blood on Thursday

Life or death main decision for school shooting suspect

FORT LAUDERDALE, Fla. — The evidence against the Florida school shooting suspect… Continue reading

Man who stole millions from Seabird Island band sentenced to 4.5 years jail

Stephen MacKinnon sentenced in Chilliwack court for stealing $2.3 million over eight years

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month