A few weeks ago, I opened the Friday Globe & Mail Real Estate section to find an article to comment or “blog” about. This one was written by Rob Carrick entitled “Rage over house prices may have a ripple effect”. His article spoke about how high prices was making no one happy – first time buyers are getting priced out of market and older, generational owners complain about taxes increasing (though their principal residence value is far outpacing any property tax increases). He argues that prices have consistently risen since 2008 at an unprecedented level and more so since 2019 to now where the national average has gone up by 37%. He also speaks to how first-time buyers (the young) can’t afford to enter the market. The increase in prices far outpaces increases in income and the economy. Without the assistance (bank of mom and dad) it is very difficult to make that first purchase. I have no argument with any of the above, although, as I have mentioned before, I remember when I was purchasing a house for the first time after taking profit from a condo purchase in 1989 and the same questions were being asked – how can first time buyers afford a $300,000 midtown home with interest rates at 10%+? I think this question doesn’t every, go away. Where I do have argument is the next part of the article where he mentions some of the solutions by others to “cooling the housing market”. These are changing the capital gains exemption or higher property taxes. Both further tax measures! It seems the easy and simple way out of any situation, especially in Canada, is to tax more, thus raising more short-term money. Remember the Toronto land transfer tax that was imposed to go along with the Provincial one? Rob Ford our flamboyant former Mayor promised to get rid of it if, and when he got into power. I imagine once he became Mayor and was asked how he was going to replace that revenue was the reason that he quickly changed his tune.

The answer to the problem of higher prices is simply a grade 11 economics answer, that of supply and demand. If we have more supply, then the demand will go down. Instead of getting mad at developers we should be applauding them (within reason) and looking for more development (also within reason). With more condos, townhouse, infill and freehold development projects brings more supply and thus less demand. Increasing taxes doesn’t solve the problem it just tries to artificially slow down the issue. It is like with COVID not having immunization shots but just more available hospital beds. It is caring for the sick but not trying to solve the problem.

If we can increase housing both affordable and otherwise the demand should start to balance out more so with the supply. I believe that, in Toronto for the next 10 years at least a “balanced” housing market is seeing pricing going up 4-6%. With our improving infrastructure, our vastly superior multiculturalism, our increased sophistication in restaurants, the arts, and entertainment, and our social safety net, Toronto will continue to see massive immigration, new companies moving and expanding in Toronto and increased need for housing. Thus, prices will continue to rise but need to be at a more “normal” rate and crazy bidding wars with 15-20 offers need to become the rarity not the norm.