Toronto’s regional housing market is cooling very, very quickly, but according to Ron Butler, a strong market fundamental will keep it afloat
Toronto’s regional housing market is cooling very, very quickly, but according to Ron Butler, a strong market fundamental will keep it afloat.
“The federal government’s plan, and it’s on track, is to work in 335,000 new people into this country this year and about 140,000 will come here,” said Butler of Butler Mortgage. “I think we’ll be fine because they want more to come next year. It’s their budgetary goal to import more people. These are people who came in under a point system. Even more will come. It’s very helpful to a housing market.”
A couple of years ago, Toronto housing appreciated somewhere in the neighbourhood of 30%, so Butler is a little flummoxed by doomsdays scenarios. While current market conditions aren’t ideal, they’ll pass.
“We have the influence of 30% in 2016, and housing is not supposed to go up like that, so there’s bound to be a snapback,” continued Butler. “Nobody enjoys this. It’s not good for realtors, mortgage people, banks, consumers whose houses are worth less. None of it is good but you can’t have 30% increases every year. When it was going on, everybody should have understood it would cause a problem eventually.”
The housing craze touched off an affordability crisis that is still engulfing a city wherein half the citizenry have permanent, full-time jobs. That is one reason the government introduced mortgage stress testing.
In fact, there are a slew of reasons, but Butler mentions one that isn’t often talked about.
“Based on the way we treat the taxes on your own personal residence, which is zero if you sell and make a profit, when you’ve got a 30% increase and you can actually borrow 80% of that money, it doesn’t make logical sense to work. Do an 80% leverage investment to make a 30% return—why would anyone work? That’s why the government was so panicked about it.
“It was a key factor. Not the only one, but a 30% increase year-on-year in a massive real estate market like southwestern Ontario is very concerning to a government. The province introduced measures, and so did the federal government through new a qualifying rate on a five-year fixed. Again, it’s not just for that, but that was on people’s minds when it happened.”
