Kofsky Mortgage

Home Real Estate Prices Are Skyrocketing!

Today, we are in one of the hottest housing markets in recent memory. Home prices are rising steadily and BC home buyers can expect this to continue. Not even Covid-19 could slow home prices down, it has started to get some national attention and concern.

RBC Economics has sounded the alarm and has asked for policymakers to act to constrain prices that are “headed for the stratosphere.”

RBC Economist Robert Hogue has stated that “Overheated markets threaten to destabilize the economy down the road if or when a correction occurs, with possible heavy costs for governments” … “The threat is particularly potent because excessively high price expectations are widespread.”

He pointed to recent data showing overheating is no longer limited to major housing markets like Toronto and Vancouver but also smaller markets too.

Hogue added that “Demand is exceedingly strong, inventories are generally low, and property values have soared to levels far outside historical norms,” and many are expecting prices to continue to soar.

Well… What is being proposed?!?!

Firstly, Hogue is calling on policy-makers IE the government to focus on efforts to address the inadequate housing supply, which has been in my opinion the #1 issue since long before the pandemic.

“These include lightening the regulatory burden for new housing approvals to quicken supply response; adjusting municipal zoning to allow more medium-density, family-friendly housing in large urban areas…; growing Canada’s stock of affordable housing significantly; and removing disincentives to build (market) rental apartments,” Hogue mentioned.

I agree wholeheartedly with these increase housing supply proposals. Other policies he has pointed to include ones that will “discourage speculative activity” such as phasing out mortgage interest expense tax deductibility for investors.

He continues by sharing that governments should take a broader look at the support they provide to homeownership, and how really all options should be on the table like principal residence exemption from capital gains tax,” but also notes that some of these changes may have unintended consequences.

Hogue also suggested further tightening of mortgage lending could be necessary “if signs of household debt stress emerge.” But he added policymakers should avoid introducing new taxes on transactions, such as land transfer taxes, and other measures “impeding labour mobility or the ability of Canadians to move to a better-suited home. They should also resist providing more help for first-time homebuyers,” he mentions.

In my personal view, any attempt to reduce the red tape and increase the supply of homes available should be strongly reviewed and action should be taken… more homes should be built, available accommodations should be made as this will help cool off the market and help Canadians find their next home.

 Generally, the legislation that has been enacted has only attempted to curb demand, but it has been minimally affective in slowing prices, but has been effective at keeping an entire generation out of the market and made it that much more difficult to achieve the Canadian dream of home ownership.

RBC is just the latest to point out that these price increases are not sustainable.

The Globe and Mail has published an editorial saying the pace of price gains is making the case for a capital gains tax on primary residences. The piece noted prices are up 270% since 2000.

Bank of Canada Governor Tiff Macklem has also mentioned his concerns, and has explained that while the situation isn’t yet as dire as it was in 2016-17, he did say a big concern is “extrapolative expectations, when we start to see people expecting the kind of unsustainable price rises we’ve seen recently go on indefinitely.”

However, given that the Bank of Canada has consistently repeated that they will keep rates low until 2023, the policy support will have to come from sources other than the Bank of Canada.

Wherever the source of that policy, it’s clear that pressure is building for some kind of response to today’s sky-high prices.

If you have any questions or would like more information about home ownership, potential rule changes and overall home finance, I am happy to help. Please connect me anytime my phone number is 604-202-9913