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“Normally, price increases prompt more people to list their homes, to take advantage of built up equity. We are seeing the opposite,” Mercer said.

As the federal government enters discussions on affordability with provincial and municipal leaders in Ontario and British Columbia, Mercer says it’s time to consider the lack of supply in the market.

“What policies are in place that are hampering supply and what changes can be made to promote all home types which will lead to more listings in the marketplace,” he said, adding Toronto needs another 40,000 to 50,000 listings from the current 160,000 annually to create a balanced market. There are about 110,000 sales were per year in the region.

Toronto had a record July, the board said Thursday. There were 9,989 sales last month, a 1.8 per cent increase from a year ago.

The strength of Toronto market comes as many commentators have wondered whether a new 15 per cent tax property transfer tax in metro Vancouver on foreign buyers will drive some of those purchasers to other jurisdiction like the GTA where no such tax exists. The city of Toronto does have a double land transfer tax but it affects domestic and foreign buyers equally.

TREB said detached homes in the city of Toronto were up 20.7 from a year ago to $1,202,753. But across the GTA, the average price of an existing detached home is now $952,983 — closing in on the $1 million point reached by new homes earlier this year.

While prices are rising, the Toronto board is clearly not endorsing a similar foreign buyer tax in Ontario.

“What we are saying is if you are looking at policies focused on the housing market, don’t just look at demand side and ways to see fewer sales. Also look at whether or not there are policies in place hampering new supply from coming on and also look at ways to promote new supply,” said Mercer, who points to the development restrictions in Toronto’s greenbelt, which may be expanded, and as part of the problem.

Financial Post

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gmarr@nationalpost.com