As the Greater Toronto Area (GTA) experiences a significant drop in condo sales and an influx of new listings, policymakers need to explore various innovative strategies to stimulate the market and restore balance.
Tax Incentives for First Time Home Buyers and land transfer tax refunds were introduced on Dec 14 , 2007, with a total maximum refund amount of $2000 when the average home sale price was $393,647. In 2017 the rebate was increased to $4000, however the average home price in Toronto has increased $1,106,617 by end of July, 2024 as per the latest TRREB data. This shows that the amount of the rebate has not kept pace with the price increases and needs to be increased or linked to as a percentage of the purchase price. Further, introducing a temporary reduction in land transfer taxes for condo purchases would also act to provide a stimulus for the condo market.
Another possible method would involve revising the Mortgage Stress Test Rules. The current mortgage stress test, which was implemented to usher in financial stability, has proven to be overly restrictive in the current high-interest rate environment. Potential approaches policymakers should consider include lowering the stress test thresholds for condo purchases, the introduction of exemptions from stress test for buyers with strong credit profiles and significant down payments towards the condo purchases. In my opinion, these can go a long way in restoring balance and helping first time home buyers fulfil their home buying dream.
Additionally, many jurisdictions in Canada had introduced foreign home buyer taxes which had acted to deter and push away temporary residents and foreign investors from buying properties. To counter the negative effects of this approach on the condo market, offering incentives for International Buyers through a targeted approach would be necessary. Such an approach would include temporary exemptions from foreign buyer tax for purchasing a condo and streamlining the process for international students.
Further, to address the oversupply of condos, all levels of government need to incentivize the conversion of unsold units into purpose-built rentals by offering tax credits to developers who convert their unsold units into rental properties. Providing grants and low interest loans for making the necessary modifications to meet rental standards would no doubt encourage builders to carry out purpose built rental conversions.
Given the continuously evolving nature of the real estate market, the decision to buy or sell real estate should take into careful consideration several factors and it is crucial to carefully evaluate your financial situation, long-term goals and local market conditions before making a decision. As a real estate professional with over 20+ years of experience in the industry, I have first-hand witnessed the housing affordability crisis in my every-day practice. In such a market, it essential to get the right advice. If you need expert guidance for your buying and selling needs, please don’t hesitate to reach out to me.
SP Singh Ahluwalia 