The latest housing data from the Canadian Real Estate Association (CREA) has prompted experts at RBC and BMO to warn yet again that housing in the Greater Golden Horseshoe needs reining in.
The MLS house price index across Canada was up 18.6% in March from a year earlier, while the average price grew 8.2% in the same time. In the Greater Golden Horseshoe of Ontario, however, prices far outpaced the rest of the country. Toronto prices were up 32% in March while Windsor saw a gain of 21%; London, 21.5%; Thunder Bay, 29%; Kitchener-Waterloo, 32.4%; And St. Catharines took first place with a huge 39.7% year-over-year gain.
On Tuesday, Royal Bank of Canada’s senior economist Robert Hogue called for targeted policy intervention from the government, noting that “the current market dynamics in Toronto and the rest of Southern Ontario pose significant risks to the stability of the market over the medium term… [and] any suite of policy measures being proposed must rein in price expectations.”
Hogue believes that unrealistic price expectations from both buyers and sellers is what’s pushing prices beyond affordability, despite the fact that the area has strong economic fundamentals.
In Toronto, low housing supply has often been blamed for the overheated market, but BMO’s Douglas Porter says that doesn’t explain price inflation in surrounding markets like Windsor, St. Catharines, and Thunder Bay. As he points out, there’s no shortage of zonable land in these cities. That suggests that the market is being skewed by something other than regular fundamentals like tight supply.
On Tuesday, Federal Finance Minister Bill Morneau met with Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory, to discuss possible solutions to the province’s housing problem. The policymakers have yet to release details of the meeting or what solutions could be in store, but have promised to keep discussions going on a regular basis. They are expected to propose upcoming policy in the near future.