Just the mere suggestion will have half the residents of the GTA at my throat.
But something has to give, while the government is looking up, down, and backwards at ways they can help cool the Canadian housing market, there’s one thing that never gets discussed, and that’s how to increase supply, rather than simply decreasing demand.
We often forget about the “supply” in the supply/demand equation. But perhaps it’s time we revisit the idea?
I didn’t cover the latest round of changes from the Canadian Finance Minister on my blog.
I don’t know why. Maybe it’s because it was covered by every single outlet, all last week?
My Facebook feed last week had three topics:
1) Donald Trump vs. Hilary Clinton
2) Mortgage rule changes in Canada
3) Cute puppies
Facebook never changes, does it?
But all day, every day, all we heard about were these mortgage changes.
And there’s likely more to come.
I believe that this week or next, John Tory, or Kathleen Wynne, will announce some sort of foreign buyer’s tax in Toronto or the GTA to match that of the Vancouver government from this past summer.
I’ve said in past blog posts that nothing the government has ever done has affected the real estate market.
They’ve made massive changes in the past, and the market continued to rise!
Remember 107% financing?
Remember 40-year amortizations?
Remember buying a primary residence with 0% down, or investment properties with 5% down?
Yeah, those juicy features are long gone.
CMHC insurance has been raised, minimum down payments have been raised, and countless policies have been enacted to try and cool the real estate market, and yet nothing has had an effect here in Toronto.
So last week, the government gave us another round of revisions.
They’re going to “close a tax loophole” that isn’t really a loophole.
There are LAWS, and those laws aren’t being enforced.
So to say there’s a “loophole” let’s our government off the hook for not doing their job.
They’re going to “revisit and potentially limit the risk to Canadians” by reconsidering how much mortgage insurance CMHC will take on.
That’s great news for Genworth and Canada Guaranty, is it not?
But the one change they’re making that does have significance is the mortgage stress test, which might take the bottom-buyers out of the market.
The little guy gets screwed, again!
It’s classic government action, after inaction, is it not?
While foreign buyers gobble up more and more of the country, the government sits idly by, and then eventually pops in, and makes it impossible for the buyers at the very bottom of the market to buy.
So while the 23-year-old who has saved from every summer job for eight years, and the late-20’s couple who have been planning to buy for three years, are no longer able to purchase, the holding company with overseas principals can continue to buy acres of land north of Toronto and hold them for the next fifty years.
We’ve heard the anecdotal stories of the neighbourhoods in Vancouver that used to be home to kids riding their bikes up and down the streets, while lemonade stands adorn the front lawns, that are now completely empty, as foreign buyers have bought up all the homes.
But I know people north of Toronto who have seen all the farm lands gobbled up by holding companies, with suspicions about these companies’ origins proving correct.
So before I stray into a fifth and sixth direction with this blog post, let me get to the crux of the matter.
If the Canadian government wants to:
a) cool the real estate market
b) make it affordable for Canadians
There is only one thing that can be done.
Justin Trudeau needs to stand in front of a podium, and announce that from this day forward, only Canadian residents may own Canadian real estate.
And since we know that day is never going to happen (I don’t even think Stephen Harper would have done that), we Canadians have to accept that the dream of owning our own home may never become a reality, and that the government’s response will always be reactive, short-term, and knee-jerk in nature, and unfair to one more segments of the population.
Everybody has come out of the woodwork in the past week with their thoughts, and their ideas, about how to solve our housing “crisis” or what to do, or not do.
Most of what you read either makes you sigh with disgust, as it’s just so biased and/or false, or it makes you silently cheer as you mutter “I’m glad somebody finally said it.”
This might not be Clinton vs. Trump, but we’re all having our own little internal debates about what to do about Canadian home prices.
So let me add my two cents to the mix.
In any market that is extremely hot or extremely cold, the cause always traces back to supply and demand.
Too much supply, too little supply, too much demand, or too little demand. Or a combination.
What we’re seeing in the Toronto market is both too little supply, and too much demand, which is a recipe for disaster.
The government’s idea, since they started “trying to cool the housing market” after the U.S.’ housing crisis in 2008-09, has always revolved around reducing demand.
The government is always trying to eliminate demand, by making it harder for interested buyers to purchase.
All of the policy changes they’ve enacted have done so, or tried to make it harder to purchase.
But what about the other side of the equation?
What about supply?
Why isn’t the government looking at ways to rapidly increase the supply of housing, thereby restoring equilibrium to the supply/demand equation?
I have always thought that Golden Horseshoe Greenbelt was a fantastic idea in theory, but one that would eventually become troublesome.
Our population is growing. Rapidly.
And as Canada adds more than 250,000 immigrants per year, many of them are going to see Toronto as the most attractive location.
Toronto is the 4th largest metropolitan area in North America, and it’s getting bigger, and bigger.
Our infrastructure will never catch up with growth, as our inept city councilors continue to debate whether a hot dog tastes better with ketchup or mustard, when we need subways, railways, roads, bridges, tunnels, schools, and parks – like we did last year, and the year before, and the year before…
But that’s a topic for another day.
The city is growing at an unsustainable rate, based on the supply of housing.
And unless Justin Trudeau stands in front of that microphone and “pulls an Australia,” then we need more housing. Period.
So where is the one place we know of, near the GTA, where there’s masses and masses of land available on which to build?
Many of you won’t love this idea.
The Greenbelt is there for a reason. It gives us air to breathe, water to drink, a place for wildlife to run free, and it’s really, really pretty.
But our population is growing.
Our housing supply is being gobbled up by non-residents, who want to hold it, and keep it empty.
Prices are skyrocketing, and will continue to do so.
We need more housing, and there’s nowhere to build.
So unless Toronto city council is going to start allowing 100-storey towers next door to 8-storey buildings (which they probably would – they love that tax revenue!), then we need to find somewhere to build actual houses, and at the same time, stop our city from becoming so dense, we can’t see through it.
There are 7,300 square kilometers in the Greenbelt.
I’m not suggesting we shoot every bird, and cut down every tree, throughout the entire Greenbelt.
But in lieu of government intervention in other areas (as noted above…) I think starting a discussion about what parts of the Greenbelt could be opened up to development is a reasonable, rational, responsible idea.
If we don’t have that discussion today, we’ll have it tomorrow.
And if we don’t have it tomorrow, we’ll have it the day after.
You get the idea.
Lots more to say on this, but I’ve been sick with the flu all weekend.
My Thanksgiving dinner consisted of soup and Gatorade!
This was the best I could muster up with the clouds in my head, but perhaps we’ll continue the discussion on Wednesday, and I have no doubts that you’ll continue the discussion below…