April 6, 2017 / 2:12 PM / in 7 months

Canada's Morneau to meet with Ontario on Toronto housing

OTTAWA/TORONTO (Reuters) - Canadian Finance Minister Bill Morneau and Ontario Finance Minister Charles Sousa will meet to discuss housing affordability in Toronto amid fears that a real estate bubble has developed in the nation’s largest city.

Canada's Finance Minister Bill Morneau speaks to a reporter after delivering the budget on Parliament Hill in Ottawa, March 22, 2017. REUTERS/Patrick Doyle

A date was not set for the meeting to discuss ways to rein in speculation and soaring prices in Toronto, but the two policymakers exchanged letters agreeing on the urgency of the situation and the need to address it.

While Sousa has urged the federal government to consider options to improve housing affordability, including increased taxes to discourage speculation or house “flipping,” he stressed that policies must be planned carefully.

“It is key that any future actions must ensure the stability of the market and do not negatively impact Ontario homeowners or the province’s economy,” Sousa said in a letter to Morneau on Thursday.

Sousa’s office provided the letter.

Toronto prices have more than doubled since 2009, even after housing has moderated in other parts of the country, and the two levels of government have been jockeying for weeks about which is best placed to respond to what economists have called a bubble.

A report released on Wednesday showed the average home price in Toronto was up 33.2 percent in March from a year earlier.

Morneau wrote to Sousa late on Wednesday to request the meeting, and Sousa responded on Thursday, offering to host it at his office in Toronto “as soon as possible.”

“I believe we must take a closer look at these evolving market conditions and take stock of its implications for our largest urban area,” Morneau said in his letter.

Morneau also invited Toronto Mayor John Tory to the meeting. Spokesman Don Peat said Tory was looking forward to attending.

Warnings about the overheated housing market in Canada’s largest city have reached a fever pitch, with the country’s biggest banks and lenders expressing concern.

Royal Bank of Canada Chief Executive Officer Dave McKay said on Thursday that overheating housing markets could inhibit Canada’s economic growth and urged the federal and provincial governments to work together to address the issue.

“Any single solution is unlikely to be successful on its own,” McKay said at the bank’s annual meeting. 

“A complex problem like this requires a multi-faceted solution, which addresses supply constraints and speculative forces and is mindful of the rate environment, which can be a moderating force,” McKay said at the bank’s annual meeting.

Reporting by Andrea Hopkins in Ottawa and Matt Scuffham in Toronto; Editing by Andrea Ricci and Lisa Von Ahn

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