BUSINESS
01/22/2018 12:56 EST | Updated 01/22/2018 13:33 EST

What Foreign Buyer Tax? Toronto Jumps In Rankings Of Least-Affordable Cities

But Vancouver retains its place as the world’s third-least affordable city.

Bernard Weil via Getty Images
The foreign buyer's tax introduced for Toronto and surrounding areas has done nothing so far to improve affordability, data from a housing-affordability survey shows.

All those new government rules related to housing seem to have done little to improve affordability in Canada's priciest cities, at least so far.

More than a year after British Columbia's government announced a tax on foreign buyers, Vancouver remains the third-least affordable city in the world, according to the latest edition of the annual Demographia survey of home affordability.

And Toronto has actually risen in the rankings of unaffordable cities since Ontario introduced its own foreign buyers tax last year, the survey found.

Canada's largest metropolis rose to number 21 on the ranking of least affordable cities, from 28th place the year before. The survey looks at 293 housing markets in nine major economies around the world.

Vancouver, meanwhile, remained in third place, the same ranking as last year. Only Hong Kong and Sydney, Australia are less affordable, according to the survey.

"House prices have been rising well above the economic fundamentals in Canada for at least a decade," the Demographia survey's authors wrote.

"Both international and national organizations have expressed concern about the damage that Canada's rising prices (some suggest a "housing bubble") could do to the national economy."

The report noted that Vancouver's median house price in the third quarter of this year was 12.6 times the city's median income, up from 11.8 a year earlier. Anything above 5.1 is considered "severely unaffordable."

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The foreign buyer's tax that the province introduced in mid-2016 "appears to have cooled the hyper-inflation at least temporarily," Demographia said. "However, house prices are now rising again, with an 11 percent increase over the past year, approximately four times the increase in average earnings."

The benchmark price of all housing types in Greater Vancouver was $1.05 million in December, the city's real estate board says. That's a rise of 15.9 per cent in a year.

Toronto also earned the title of "severely unaffordable." Its median house price was 7.9 times its median income in the third quarter of 2017, the period covered by the Demographia survey, up from 7.7 a year earlier.

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Ontario's government announced a foreign buyers' tax and a slew of other measures last April designed to slow house price growth. The rules had an immediate impact on the detached home market. Price for single-family homes were about 2.5 per cent lower in December than they were a year earlier, at an average of $989,000. But condo prices in the city have continued to rise rapidly, up 14.4 per cent in a year to nearly $504,000.

The survey reiterated an argument it had made in previous years: Toronto house prices are being driven up by government-imposed limits on development.

"In Toronto, the housing affordability loss has been associated with the middle-2000s adoption of urban containment policy (the Places to Grow Act), including a Green Belt and other draconian restrictions," the Demographia report stated.

Of the 46 Canadian cities surveyed by Demographia, 14 ranked as "severely unaffordable," while only 11 ranked as "affordable," meaning median house prices no more than three times median income.

There is a "paradox" at the heart of the affordable housing issue, Demographia says.

"Housing is both an asset and a good providing a flow of housing services — a place to live," the authors wrote. "The interests of house owners do not align with those of would-be house owners. Rising house prices relative to incomes pit the old against the young and the rich against the poor."

Sadly, that's a reality Canadians are aware of all too well these days.

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