Ontario Budget 2023 – What does this mean for home buyers in Toronto?
Housing in Canada is at a premium in major cities like Toronto, Vancouver, and Montreal, where population growth has outpaced the construction of new homes. The country is also set to welcome a record number of new permanent residents in the coming years, with targets ranging from 410,000 to 550,000 annually between 2023 and 2025. However, the inventory remains low across the country, home prices are increasing, and Canadians looking at Toronto Houses for sale are struggling to find the right fit.
To address this crisis, the Province of Ontario has set an ambitious goal of building 1.5 million new homes by 2031. The More Homes Built Faster Act, or Bill 23, aims to streamline the development process, reduce red tape, and increase the supply of new homes. By making it easier for developers to build new homes, the hope is that there will be a greater supply of homes available for sale, which will help to bring prices down in Real Estate Canada.
Toronto is a significant player in the efforts to address the housing crisis in Canada. The city is taking steps to meet and exceed the target of 285,000 new homes by 2031. To achieve this, the city has released a work plan for its Housing Action Plan 2022-2026, which outlines measures to accelerate home construction in Toronto.
The work plan includes strategies such as streamlining approvals for new development projects, increasing the supply of affordable rental housing and exploring new financing models for affordable homeownership. Toronto also seeks to leverage underutilized public lands for affordable housing development in partnership with non-profit and private sector developers.
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The More Homes Built Faster Act, 2022
The Ontario government recently passed the More Homes Built Faster Act, 2022, to address the ongoing housing supply shortage. The legislation aims to simplify planning and approval processes, provide stronger homebuyer protections, and reduce government fees that increase the cost of new homes, making living costs more affordable for Ontario residents.
To construct 1.5 million homes over the next decade, the government will work with local authorities, the private sector, and the federal government. The province is promoting building near transit and reducing bureaucratic costs to streamline development approval processes and encourage housing development.
The Non-Resident Speculation Tax rate has been increased to 25 percent and is now extended province-wide to limit non-resident investors from speculating on the housing market. It also implements stricter professional standards for home builders and vendors, increasing fines to discourage unethical behaviour and allowing Tarion to extend warranties on unfinished items in a new home to protect consumers better.
The Streamline Development Approval Fund is a government initiative that supports housing development by modernizing local approval processes for residential developments, which will help meet the target by 2031.
Translating Vision into Action
The Ontario government’s 2023 budget projections reveal that the province’s target for new homes is slipping each year. New housing starts are expected to remain below 80,000 annually, revised downwards from the previous year’s budget estimates. Canada Mortgage and Housing Corporation (CMHC) reports that this target appears challenging, with only 71,545 housing starts projected for 2023. To address this issue, the government has implemented measures such as reducing and exempting fees for developers to encourage new home construction.
Changes in Regulations
In the next few years, Canada plans to accept a historically high number of new permanent residents. To accommodate this influx of newcomers and address housing supply issues, the government has amended regulations to allow non-Canadians to purchase residential property in certain circumstances.
Previously, individuals holding work permits in Canada could purchase a property if they had filed tax returns for three of the previous four years. However, this requirement has now been eliminated, meaning that work permit holders can purchase property without meeting this condition.
In addition to this change, non-Canadians are now permitted to purchase vacant land that is zoned for residential or mixed-use development for any purpose, including residential development. These changes have opened up new opportunities for both work permit holders and non-Canadians looking to invest in Canadian real estate.
Toronto’s Housing Market
Toronto is also taking steps to address housing issues through the HousingTO 2020-2030 Action Plan. The comprehensive plan, developed through public and stakeholder consultation, outlines specific targets and financial investments needed to achieve its goals over the next decade.
However, Toronto’s housing market was hit hard by rising interest rates last year, with average home resale prices in January 2023 down 21.3% from their peak in February 2022. Home resales were also down by 43.4% in January 2023. Despite this, the city’s housing market is expected to stabilize.
The number of home resales is projected to decline by nearly 9% in 2023, rebound the following year, and eventually return to more consistent levels. Average home prices are expected to decrease by 9.7% this year before rising by 2.2% in 2024 and continuing to increase in the following years.
Summary
The demand for affordable housing in Ontario is still a significant challenge. The More Homes Built Faster Act and the HousingTO 2020-2030 Action Plan offer promising initiatives. Still, more needs to be done to increase new housing starts to meet growing demand, especially with the expected influx of new immigrants.
Moreover, work permit holders can now buy property in Canada under certain conditions. This marks a change from the previous ban on work permit holders purchasing residential property in the country.
In the Greater Toronto Area (GTA), the number of new property listings has decreased compared to previous years, leading to a higher demand for properties. This situation will likely result in increased competition among buyers as they vie for the limited number of properties on the market. Consequently, real estate will see rising prices, particularly those properties that are more affordable and attractive to first-time buyers.
Although the Canadian real estate market has experienced some fluctuations, 2023 presents an excellent opportunity for investors to enter the market due to the recent pause on interest rates and softening prices. First-time investors should research and carefully consider their investment options, consult reliable real estate brokerages, keep an eye on market trends, and be prepared for any changes to ensure success.
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