“Quem casa quer casa” its a Portuguese expression that means “people who just get married want a house to live’, and this relates to everyone who wants to live outside of their parents’ house and have their independence. But can millennials still think about that? Is the dream of homeownership still viable? The numbers are alarming, buying a house in Ontario, especially in Toronto, never costted that much.
Some people described Canadian real estate as a real estate bubble. The prices of houses between 2003 until 2019 increased up to 337% in some cities and the rental prices are no different.
This year, the Bank of Canada released a report entitled “Disentangling the Factors Driving Housing Resales” in which they stated that Canada’s housing market is “currently in uncharted territory”. While the report does not use the word “bubble”, instead using the term “froth”, to describe the current state of the housing market, it states the rapid increase in pricing in certain markets can be attributed to an unexpectedly robust labor market and fear on the part of buyers of being priced out of the market caused inflation: “Much of the previous strength in resale activity was influenced by extrapolative expectations”. The report concludes that with increases in household debt, stagnant wages, and expected rise in interest rates, a snap-back may be inevitable.
The rules of buying a house are straight and discriminatory and people are staying in rentals longer because they can’t find a home they can afford.
Milénio Stadium talked with Tim Hudak, CEO of Ontario Real Estate Association (OREA), to understand more about the real state of Ontario, especially in GTA.
Milénio Stadium: Why is it so expensive to buy a house here in Toronto?
Tim Hudak: First it’s a great place to live. And more and more people have discovered that. So the problem is we’ve not built enough new homes or new rental units to keep up with demand. The Greater Toronto and Hamilton area is attracting talented emigrants across the world. A lot of other Canadians are moving to the area to find good jobs. And we have a generation of millennials who are now getting promoted at work. They may be lucky to have families. All of these things mean there’s more demand for housing, but we have not built enough homes to keep up. You have more and more people were chasing fewer and fewer homes or rentals. Basic economics tells you it’s going to drive the price up.
MS: For a new couple it’s still possible to dream about buying a house?
TH: Absolutely. There can still be homeowners. We deeply fight for the young couple who want to become homeowners, or the young millennials who got promoted at work wants to move out of mom and dad’s basement. We fight for them. We face them every day. Here’s how we do it, three targets. We have to help those aspiring homeowners. Number one, increase the number of homes and choices in the marketplace. We launched a campaign in 2015 called “Keep the Dream Alive” to all the government’s attention to the affordability crisis and homeownership. I have to say that the government responded with new legislation called the “More Homes More Choices”, so help is on the way. Number two, the federal government has made it more difficult to get a mortgage; It is, in fact, to Canadians, entrepreneurs, the people who come from modest backgrounds but are saving every penny. If you’re rich or your parents are, it doesn’t matter, you’re ok. But if you come from a modest background, the mortgage restrictions are unfairly discriminating against you. We’ve called on the federal government to fix the broken stress test and allow for a return of 30 year mortgages. And number three, the taxes are too high. When you buy a house, especially in Toronto, you pay a massive land transfer tax just when you get the keys. We think that all first time homebuyers should not have to pay that tax to help them get into the marketplace.
MS: So what is the plan for the next two years to control the increase of prices?
TH: There are two problems when it comes to rental housing. Number one, people are staying in rentals longer because they can’t find a home they can afford. If we get more starter homes and move up homes in the marketplace that are affordable, then renters will move out and free up good apartments for other people. Secondly, there’s been too much red tape and regulation and that has really discourage people from becoming mom and pop landlords, or businesses opening new apartments. We want to encourage more people to supply rental housing and give renters more choice and more affordability in the market.
MS: What’s the average two bedroom apartment in Toronto compared with the rest of Ontario?
TH: Is increasing and there is a shortage in the marketplace but no doubt Toronto will have by far the highest rent costs. That’s really unfair to students and people from modest income. The best way to help is, number one, increase the supply of housing, both owned housing and rentals in the market. You should also encourage homeowners to do more secondary units, note for example, but apartments above the garage. The problem today is that there are so many rules and regulations that stand in the way of secondary suites that people say, why should I bother and do?
MS: Can you explain why there’s tighter rules to buy and sell houses?
TH: I believe that over time the government has piled on more and more rules around homeownership or housing, and they don’t get rid of the old rules. And as a result, it is very expensive to build a new unit. For example, if you first put the first shovel in the ground to build a home, the costs of all the red tape and rules is 125.000 dollars and that is outrageous.