The speculation of Canadians investing in the real estate market is “absolutely” one of the factors contributing to the incredible prices of housing, says an economist studying housing trends.
In an interview with The West Block guest host David Akin, Mike Moffat of the University of Ottawa’s Institute for Smart Prosperity said the focus on speculation from foreign buyers ignores the fact that domestic speculation is also part of the problem.
“The ugly part is some of the measures they talk about as speculation, it’s a bit of blaming foreigners for our problems, where there is a lot of internal speculation that is happening,” he said.
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The Federal Liberals have made housing inaccessibility a key element in their 2021 campaign, and in the coming months highlighted campaign promises and the recent budget, which they say will help ease the crisis.
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These measures include banning most foreign buyers for two years and imposing higher taxes on people who change properties within 12 months of buying them – part of a growing effort to target the Canadian housing market.
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Financing is a term that is increasingly used by investors who buy real estate – usually residential property that could otherwise serve as starting homes or affordable rental units – and then treat it as financial assets to generate. of profit, either by resale or increase in rents.
Data from the Bank of Canada in December 2021 show that investors – what it described as “mainly local buyers” – are ahead of buyers for the first time during the COVID-19 pandemic. And last week, Statistics Canada warned that many property buyers were “limiting” already limited supplies to urban markets.
Read more: At least 20% of Canadian MPs hold rental property and investment amid the housing crisis
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But as Global News reported on April 13, a third of the Liberal cabinet owns real estate assets for rent or investment, while at least 20 percent of lawmakers from all parties do.
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However, Trudeau declined to say whether he would consider measures such as taxing secondary or subsequent property purchases at a higher rate to curb speculation, and appears to be defending Canadians using real estate as an investment.
“Obviously it’s different if it’s home, it’s different if MPs do it,” Moffat said.
“I thought it was a little problematic how he was nailed to non-Canadians, where both Canadians and non-Canadians play an absolute role in our housing market.”
Moffat added that the promise to build more homes was “fantastic”, but more complicated than it seemed.
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Part of this, he said, is due to the fact that much of the responsibility lies with provincial and municipal jurisdictions, exacerbated by the lack of skilled workers and “bottlenecks” in supplies.
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As a result, he said that both Prime Minister Justin Trudeau and Conservative candidate Pierre Poalievre – one of dozens of lawmakers who own property for rent or investment – had recently proposed measures for carrots and sticks.
They aim to either stimulate or have an impact on municipalities based on whether their employees approve new building permits and ease the zoning restrictions that stand in the way of new homes.
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The main question remains whether the increase in interest rates by the Bank of Canada will be able to cool demand in a market that has been blowing in the mouth for the past two years.
Inflation is currently 6.7% – “higher than one expected”, Moffat said, citing growing speculation about the emerging potential to raise interest rates by 75 points in June.
“If this happens on June 1, you’ll see a lot of people pull away and say, ‘Okay, you know what?’ Maybe I don’t want to take out this five-year mortgage, to buy this new home, given how expensive the interest rates will be.
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