There has been much speculation about the cause of high prices in the Greater Toronto area residential Real Estate market.

The first question is, what are the major factors driving supply and demand.

Demand is being driven by extremely low interest rates and approximately 120,000 newly arrived immigrants choosing Greater Toronto as their home annually.

The collapse of the Alberta (oil based) economy has driven 200,000 people out of work. Many of these newly unemployed people, and many immigrants that would normally choose Alberta as their new home, are likely migrating to the Greater Toronto Area and compounding the problem of overheated demand.

Both factors, extremely low interest rates and large numbers of new residents, have been occurring for several years and are expected to continue in the foreseeable future.

Turning to Supply, it is limited by the number of new homes and condominiums that Toronto Area Developers are permitted to build.

The Ontario Government has restricted the amount of land being permitted to be developed with the Oak Ridges Moraine Act, 2001.

The protected land creates a barrier for residential Real Estate development that contains the expansion of the GTA from Brampton to Oshawa.

Higher demand for Real Estate, in an environment of constant or limited supply, puts upward pressure on prices.

Another important factor impacting the price of homes and condominiums is the cost of taxes on preconstruction houses and condominiums.

Taxes on new houses and condominiums include HST, Education Levies, Park Levies, Development Charges, Section 37 charges, Ontario Land Transfer Taxes, and in some cases Toronto Land Transfer Tax.

Greater Toronto purchasers of new houses and condominiums are paying an alarming 15% to 20% in additional taxes.

For example, that means at least $150,000 of a $1M new house and $75,000 of a $500,000 new condominium is tax.

So the major factors effecting the high price of Toronto Area Real Estate are:

An imbalance in the number of new immigrants emigrating versus the number of new immigrants that the Greater Toronto Area can comfortably absorb;

The Oak Ridges Moraine Act limiting the availability of land for residential development; and

The massive, aggregate tax of 15% to 20% on new houses and condominiums.

So what is the solution?

Common sense would be to address the number of new immigrants coming to the GTA, to eliminate the HST on new homes and condos, eliminate Section 37 charges, and to eliminate the City of Toronto Land Transfer Tax.

Due to the obvious economic benefits that new immigrants bring, and a lack of Political “will” to reduce taxes, I do not expect any of these options to be utilized.

The obvious, and more palatable solution to the Politicians, is to increase supply.

Supply can be increased by:

1) Governments increasing investment in infrastructure that would enable more land to be developed into residential;

2) The Planning Departments adopting a policy to allow greater density on proposed low and high rise residential Developments (where possible);

3) Developers proposing denser low rise property types like back to back semi-detached houses (drastically reducing the amount of land needed), detached singles that are easily converted by a new owner to duplexes and triplexes, and investment properties like four plexes, and six plexes, as a few examples;

4) Commercial Developers should have a second look at box malls and strip plazas, and reacting to the changing landscape of retail sales, redeveloping commercial properties in key locations to have a residential high rise component;

5) The Planning Department being more flexible with downtown industrial and commercial zoned land being rezoned to residential;

6) The Planning Department taking a more balanced approach in respecting the land rights of land owners and the taxpayers who will buy new homes and condos in the free market versus NIMBY neighbours who are against local Development; and

7) Land Developers and the Planning Department should work together to create more super projects like Downtown Markham. We could create the downtown North York that Mel Lastman championed in Aurora, Newmarket, Stouffville, or Milton. (I met with the CEO of Greenland Canada and his company is interested in providing huge neighbourhood improvements for their super projects to a level that has never been seen before.)

The solution is not to create a punitive tax on foreign investors.

As a Broker who sells multiple condo towers and low rise projects for Developers, I can tell you that about 2% to 3% of new home and condo sales in the GTA are to authentic overseas buyers who do not have status or a financial stake in Canada.

The reason new home Real Estate Brokerages know this is because we require identification from Purchasers, and those who are authentic overseas buyers are required to submit a significantly larger deposit.

Mayor Tory has stated publicly that he is aware that taxing foreign investors is not a solution that will yield any meaningful results.

The Toronto Area Baby Boomers are the wealthiest generation ever, in large part, due to the current high cost of Real Estate.

The vast majority of the middle class would credit Real Estate as their largest investment.

This is good news for some.

However our current generation of twenty-somethings will be the first generation of children since the beginning of the Industrial Revolution, that will have a lower standard of living than their parents.

They will struggle to afford down payments for their homes, and likely live in much smaller spaces than they grew up in, due to the high cost of Toronto Area Real Estate.

The recent CMHC changes and the reduction of the 35 year amortization make it more difficult for first time buyers to buy.

Real Estate ownership and investment is the gateway to personal wealth and financial security for average Ontario residents.

Any punitive tax measures on local Ontario residents show a lack of understanding, and respect, for tax paying Real Estate buyers and sellers.

The government should not pick groups like first time buyers and the hard working, successful middle class and stop them from their opportunity to attain financial security.

An approach focused on increasing supply is the only way to respect Ontario residents’ ability to buy, sell, and invest in local Real Estate.

The view is one important factor in determining the value of a condominium, a house, cottage property, and some commercial space.

Properties offering superior views allow Developers to charge a premium and realize higher profits.

There is a quantum leap on the horizon for views.

But first let’s understand how views have evolved up until now.

With condominium views, back in the 1980’s, windows were small like those found in the bedrooms of houses.

Views were very limited unless someone stood with their face near the window.

Developers began to offer larger windows first, and then they evolved into wall to wall half height windows.

In a recent conversation I had with Peter Clews of Architects Alliance, Peter told me that there was quite a bit of resistance from Developers to embrace the next step, floor to ceiling, wall to wall windows.

The top Toronto Architect reported that this resistance was based on a potential concern about living in a fish bowl. The potential lack of privacy.

Despite this concern, the panoramic view was born and the public embraced the luxury feature.

Many people won’t realize that the view has evolved further.

One example here in Toronto is Daniel Liebskind’s L Tower.

The lower third of units and the upper third of units, facing north have a curved glass view.

This widens the perspective of the viewer similar to a car windshield effect.

North facing units on the lower third of the building have a wall to wall panoramic view but, due to the angle of the glass, have a greater perspective of what is happening lower than the normal site line of a traditional wall to wall panoramic view. They feel more connected to what is happening on the ground.

The higher units enjoy a “vertical panoramic view” in addition to the regular panoramic view.

An enhanced star and city view.

So what will the view of the future look like?

Well, in the 1980’s, the time when windows were small, many of us would not have believed that the general changes that we have experienced in life were realistic, especially when we compare it to how digital technology has evolved with computers, television, cell phones, and the Internet.

Those who still watch movies on television with their VCRs should stop reading now.

Imagine if you could have a different, breathtaking view anytime and on demand?

A view that you could not tell from the real thing.

A view from the hotel from your honeymoon or favorite vacation, or from Hong Kong, Dubai, London, or New York.

Live views, or time of day synced international views could be possible, providing an option to enjoy live sunsets and sunrises of your favorite views.

The choices are unlimited!

There is a clear, thin skin that can be applied to a window that acts as a television screen.

A high definition, digital projection TV, technology that continues to improve every year, can provide the picture for the custom view.

But it is not only condominiums with blocked views, or that lack views, that can benefit.

Imagine the views in regular houses, cottages, and commercial spaces that don’t have a premium view.

And one step further, basement apartments.

Windows are not needed. The custom, dream view can be projected onto a plain white wall, or a thin monitor can be seamlessly built into the wall.

With current and future technology, a sunrise could light up the room like daylight.

Add the sounds of waves and birds to an ocean view from a beach front holiday house in the Bahamas.

Perhaps one day technology will allow us to enjoy a cool ocean breeze on a hot summer day, even an ocean scented breeze.

A 3D view could bring interesting possibilities.

Imagine the health benefits of having this view available in hospitals.

There are positive emotional effects from the fireplace channel, the live picture of the wood burning fireplace.

Many 20 somethings will play music dance videos on their TVs and immediately elevate their moods before they go out to a club.

So there could be positive emotional effects from an enhanced digital view for everyone.

With a simple click of a button on a remote, a viewer could watch Television on their digital window, or have a custom sized giant TV within their digital window. Picture in picture.

The time will soon be upon us when one real view of the CN Tower, or the lake at the cottage, will be so 2017!

That’s the view of Scott Davie – Davie Real Estate Inc.

One of the most important issues in today’s GTA residential Real Estate market is the lack of affordability.

What can be done to address this important issue?

We need to find ways to decrease the cost of land through efficiency in design.

One example of this is what I call “Back to Back Singles”.

It is essentially a semi-detached house that shares the same outside wall as the house behind it.

From the street it appears to be detached.

Like Mattamy’s “wide lot” (aka wide shallow) design it would be a shallow, more square than rectangular house design.

So like Mattamy’s design, it would appear larger than it actually is, and it would also be more prestigious looking than a regular semi-detached.

No outside space, you say?

Add a hidden roof top terrace, completely private from view behind a pitched roof.

Many first time buyers are millennials who prefer not to have to cut grass.

They would have the benefit of the outdoor space without the maintenance of a backyard.

It could be designed to be safer for small children than a backyard.

Reducing the amount of land used by one third means Developers could supply significantly more houses in their development, which translates into the Developer making more money.

A higher density of homes in a Development contributes in a positive way to the shortage of supply in the marketplace.

A lower price means more first time buyers can afford to buy the “Back to Back Singles”.

Reducing the cost of land by one third could save consumers $150,000 or more!

There has been much speculation about the cause of high prices in the Greater Toronto residential Real Estate market lately, without success in identifying the root of the problem.

The first question is, what is driving prices upwards?

First we look at the major factors driving supply and demand.

Demand is being driven by extremely low interest rates and approximately 120,000 newly arrived Canadian immigrants choosing Greater Toronto as their home, annually.

The collapse of the Alberta (oil based) economy has driven 200,000 people out of work. Many of these newly unemployed people, and many immigrants that would normally choose Alberta as their new home, are likely migrating to the Greater Toronto Area and compounding the problem of overheated demand.

Both factors, extremely low interest rates and large numbers of new residents, have been occurring for several years and are expected to continue in the foreseeable future.

Turning to Supply, it is limited by the number of new homes and condominiums that Toronto Area Developers are permitted to build.

The current Ontario Government has restricted the amount of land being permitted to be developed with the Oak Ridges Moraine Act, 2001.

The Ontario Ministry of Housing defines the Oak Ridges Moraine as an environmentally sensitive, geological landform covering 190,000 hectares.

The protected land creates a barrier for residential Real Estate development that contains the expansion of the GTA from Brampton to Oshawa.

Higher demand for Real Estate, in an environment of constant or limited supply, puts upward pressure on prices.

Another important factor impacting the price of homes and condominiums is the cost of taxes on sales of preconstruction houses and condominiums.

Taxes on new houses and condominiums include HST, Education Levies, Park Levies, Development Charges, Section 37 charges, Ontario Land Transfer Taxes, and in some cases Toronto Land Transfer Tax.

Greater Toronto purchasers of new houses and condominiums are paying an alarming 15 to 20% in additional taxes!

That means at least $150,000 of a $1M new house and $75,000 of a $500,000 new condominium is tax.

So the major factors effecting the high price of Toronto Area Real Estate are:

An imbalance in the number of new immigrants emigrating versus the number of new immigrants that the Greater Toronto Area can comfortably absorb;

The Oak Ridges Moraine Act limiting the availability of land for residential development; and

The massive, aggregate tax of 15 to 20% on new houses and condominiums.

Ontario Finance Minister Charles Sousa says, “something has to be done to help people deal with soaring home prices in Toronto, especially first-time buyers who find it nearly impossible to save a big enough down payment to enter the market.”

The Toronto Area Baby Boomers are the wealthiest generation ever, in large part, due to the high cost of Real Estate.

The vast majority of working class and middle class Baby Boomers would credit Real Estate as their largest investment.

This is good news for some.

However, our current generation of twenty-somethings will be the first generation of children since the beginning of the Industrial Revolution that will have a lower standard of living than their parents.

They will struggle to afford down payments for their homes and likely live in much smaller spaces than they grew up in due to the high cost of Toronto Area Real Estate.

Record Ontario Government debt, according to the Ontario Financing Authority, is over 327 Billion Dollars and is the highest per capita debt of any state or province in the world.

The Canadian Government seems to be on the same path as Ontario, following advice from the same senior advisor Gerald Butts and others.

It is important to put into perspective the recent Ontario Government announcement of a $2,000 increase in the first time home buyers Land Transfer Tax rebate versus an increase of $10,000 to Land Transfer Tax for residents purchasing a $2,000,000 or more home.

The Government is behind the three major factors that are responsible for the High Toronto Area Real Estate prices.

Perhaps the Government should stop trying to help us.

Scott Davie is an industry leading Real Estate Broker who is a trusted

advisor to many of the GTAs top Developers, creating dynamic results in the sales and marketing of high-rise and low-rise pre-construction projects throughout the GTA.

Davie has been recognized by the main stream media, and by the Real Estate Industry main stream and ethnic media, as a leading expert in new home and condo sales and marketing.

After 10 years at Milborne Real Estate, Scott has recently left his position as Vice President to open his own pre-construction Brokerage.

Davie Real Estate Inc. will be launching in 2017.

Prices for residential real estate soared in the Greater Toronto Area in 2016 and the trend is expected to continue in 2017.

“The high cost of real estate in Toronto is across the board— in resale homes, new high-rise condos and low-rise houses,” said Scott Davie, former vice president with Milborne Real Estate.

Just why are GTA prices so high and what’s driving them up? Davie recently sat down with the Epoch Times to explain what’s behind the continued escalation in home and condo prices.

There are several factors driving housing demand, Davie explained, including low interest rates and immigration.

About 120,000 new immigrants choose to move to the GTA each year. These people aren’t just those from foreign countries who have opted to make Toronto their home. The collapse of Alberta’s oil-based economy and the loss of 200,000 jobs has immigrants who would normally choose Alberta as a place to live to looking to Ontario instead.

Many Canadians who have lost jobs in the west are also moving to the GTA where they have better employment opportunities. This has been happening for several years and will continue for the foreseeable future, said Davie.

In the Toronto area, there is also a housing supply problem, said Davie. Toronto area developers are limited in the number of new homes and condos they can build.

The Ontario government restricted the amount of land that can be used for development, with legislation such as the Oak Ridges Moraine Act of 2001 that prohibits development on 190,000 hectares deemed as environmentally sensitive, and the Ontario Greenbelt Plan, enacted a decade ago, that protects 800,000 hectares surrounding the Golden Horseshoe and runs through the GTA.

This protected land has created a barrier that has limited expansion of the GTA from Brampton to Oshawa, while at the same time demand for homes is increasing. This has put upward pressure on house prices, Davie explained, and caused former small communities such as Milton, Caledon, Bradford, and northeast Markham to boom as developers look for places where they can build. The land shortage has also been compounded by lengthy delays in the municipal approvals process, as it can take in excess of a year for a project to get approval and on the market, said Davie.

The taxes imposed on pre-construction homes and condos are another factor affecting prices. These include HST, education levies, park levies, development charges, Section 37 charges (for community benefits such as parks, libraries, etc.), Ontario Land Transfer Tax and in some cases, the Toronto Land Transfer Tax.

Buyers of new homes and condos in the GTA are paying a staggering 15 to 20 percent of the purchase price in taxes. That would be $150,000 of the cost of a $1 million new house or $75,000 of a $500,000 new condo, Davie pointed out.

To recap, Davie said the price escalation is due to: the number of new immigrants coming to Toronto beyond what the GTA can comfortably absorb; the limits on land available for development; and massive taxes.

While the increasing prices have been good news for GTA baby boomers who are the wealthiest generation ever, thanks in large part to their investment in real estate, said Davie, it’s not good news for the current generation of twenty-somethings. They will be the first generation since the Industrial Revolution who will have a lower standard of living than their parents. They will struggle to afford down payments for homes or condos and will likely live in much smaller spaces than the ones they grew up in, due to affordability.

The federal government has also imposed new mortgage qualifications on first-time buyers that will take a number of them out of the market because they won’t be able to get mortgages with major banks. The vast majority will still be able to arrange financing, albeit they may have to deal with alternative lenders other than the big banks and pay higher interest rates, said Davie.

He also pointed out that while a recent Ontario government announcement does offer first-time buyers a $2,000 Land Transfer Tax rebate, at the same time purchasers of homes of $2 million or more will have a $10,000 increase in their Land Transfer Tax.

The major factors driving up home prices in the GTA—immigration, land constraints and taxes—have all been created by government, Davie pointed out, and suggested perhaps it’s time for government to stop ‘helping’ the housing market.

Davie, who has more than 30 years’ experience in the GTA real estate market and has worked for Milborne Real Estate for the past decade, will be lauching his own business, Davie Real Estate Inc., in early 2017.

He plans to work with developers who are interested in doing innovative things in terms of architecture, design, public relations, and marketing, and who desire to bring creative new projects to the Toronto area market.

Feature article in Epoch Home and Property Magazine, 2017 Chinese New Year Edition and online in US China News.