Another day, another gloomy headline for Toronto’s housing market.
Demographia has just released its annual ‘Housing Affordability Survey‘ and has ranked Toronto as the 21st out of 293 cities around the world for unaffordability. This is up from 28th place the year before.
The report measures middle-income housing affordability in 92 major metropolitan housing markets, which includes Australia, Canada, Hong Kong, Ireland, Japan, New Zealand, Singapore, the United Kingdom and the United States.
The report found that two of Canada’s six housing markets are “severely unaffordable” which include Toronto and Vancouver.
According to the report, over the last 14 years, Toronto’s house prices have doubled in relation to household incomes, and because of this, Toronto is one of the cities in the world with the greatest risk of developing a ‘housing bubble’.
Toronto’s median house price was 7.9 times its median income in the third quarter of 2017, which is up from 7.7 a year earlier.
In order to curb the rapidly growing housing prices, the report highlighted the province’s ‘Foreign Buyers Tax‘ that was implemented during the second quarter of 2017 and added that the tax allowed hyper-inflationary price increases to stop.
The report also added how the cooling effect of the tax “was most evident in the highest cost segment” (detached houses) and that price increases “were greatest in the lowest cost segment” (apartment condominiums).
When it comes to what is driving house prices, prices are being driven up by government-imposed limits on development, which include “the middle-2000s adoption of urban containment policy (“Places to Grow”), including a Green Belt and other draconian restrictions,” the Demographia report stated.
Of the 46 Canadian cities surveyed by Demographia, 14 were classified as “severely unaffordable,” while only 11 Canadian cities are considered “affordable,” meaning median house prices no more than three times median income.
According to the report, the most affordable markets in Canada are Moncton, NB, Fredericton, NB, Fort McMurray, AB, and St. John, NB.