Ryerson City Building Institute examines demand factors behind the unaffordable Toronto real estate market
A new policy paper released by the Ryerson City Building Institute examines demand factors behind the unaffordable Toronto real estate market.
The paper, titled “In High Demand: Addressing the demand factors behind Toronto’s housing affordability problem”, also finds that the case for supply-side reform is overstated and wouldn’t address the immediate challenges facing the Greater Toronto Area real estate market.
Among the paper’s findings:
- High demand, both foreign and domestic and multi-property investment and speculation, are the primary drivers; low inventory is a result of this demand.
- Although critics allege that there is weak supply, housing construction in Toronto has kept up with population growth, so demand factors beyond population growth are at play.
- Active listings are at record lows, while new listings have remained steady, indicating that high demand is drawing down inventory.
- While some analysts point to the Greenbelt as a major cause of rising prices, research shows geographic constraints don’t account for the price increases Toronto has experienced.
- In a housing bubble, not even a substantial amount of new supply can meet speculative demand. In U.S. cities like Phoenix and Las Vegas, for example, prices continued to skyrocket despite elastic supply.
- Careful demand strategies are needed to curtail or discourage speculation and shift market expectations.
“It’s clear from this analysis that demand factors are driving up prices in the GTA, “says Cherise Burda, Executive Director of the Ryerson City Building Institute. “The provincial government should carefully consider a range of solutions to address demand. Focusing on supply only will not solve the problem.”
“A demand-oriented policy approach would help tackle the affordability problem in Toronto,” says author of the paper, Josh Gordon, assistant professor of public policy at Simon Fraser University (SFU). “Examples that may help homebuyers include a foreign-buyer tax as well as a progressive property surtax that can be offset by income taxes paid.”
Download the policy paper.