(Bloomberg) -- Canadian Finance Minister Bill Morneau wants policy makers to take a “closer look” at ways to slow the torrid growth of Toronto's housing market, saying the region has problematic conditions that threaten both stability and affordability.
Morneau wrote Ontario Finance Minister Charles Sousa, inviting him and Toronto Mayor John Tory to meet to discuss “how we can collectively make progress” on housing challenges in and around Canada's biggest city.
Toronto prices rose 33 percent in March from a year earlier, according to the city's real-estate board. An average detached downtown home now costs nearly C$1.6 million ($1.2 million).
“I am concerned that dramatic house price increases will have long-term implications for housing affordability and housing market stability,” Morneau said in his letter, a copy of which was obtained by Bloomberg.
The Canada Mortgage and Housing Corp. has found “strong evidence of problematic conditions,” Morneau added. Low interest rates and rising home prices have led buyers to take on high levels to debt to get into the market, making them susceptible to “changing economic conditions.”
Morneau's letter comes after Sousa called on the federal government last month to raise taxes on the sale of investment properties. Morneau's budget, delivered days later, left capital gains rules unchanged.
Toronto and Vancouver are Canada's hottest housing markets. In Vancouver, policy makers imposed a foreign-buyers tax. In an attempt to cool growth across the board, the federal government has tightened mortgage eligibility rules and proposed that banks take on more default risk.
To contact the reporter on this story: Josh Wingrove in Ottawa at jwingrove4@bloomberg.net.
To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary, Chris Fournier
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