RE / MAX urges policymakers to be ‘careful’ with housing market cooling measures

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STOREYS editorial team

As the demand for housing increases and the supply becomes depleted, tensions continue to exert in the Canadian housing market, leading to higher prices, bidding wars and the that buyers are being kicked out of their towns and villages.

As such, discussions on the overheating Canadian housing market continue, prompting the government to take action to address the situation – which has already been called “national concern. “

Robert Hogue, an economist at RBC – the nation’s largest bank and largest mortgage lender – recently said in a research note: “Demand is extremely high, inventories are generally low and property values ​​have skyrocketed. levels far beyond historical standards.

“To make matters worse: buyers and sellers expect prices to continue to climb,” Hogue added.

LILY: Signs of overheating in the Canadian housing market are now apparent nationally

Another growing concern is that, with interest rates currently at their lowest, along with changing housing needs and rising household savings, demand is only growing.

Not to mention the surge in prices which subsequently creates waves of demand, as unprecedented prices cause buyers to panic in the face of a afraid to miss on the relative accessibility of small markets. (And we mean ‘relative‘.)

As such, Hogue says policymakers should step in and do something, as an overheated housing market threatens to “destabilize the economy in the future if or when a correction occurs, which could lead to high costs. for governments ”.

“The threat is particularly powerful because excessively high price expectations are prevalent,” Hogue says, adding that Canada has not experienced market overheating of this magnitude since the late 1980s.

And while Hogue isn’t the only one calling for help chilling the market, a Canadian real estate company is calling on governments to be cautious in chilling measures.

In one joint statement by Christopher Alexander, Chief Strategy Officer and Executive Vice President at RE / MAX Ontario-Atlantic Canada and Elton Ash, Regional Executive Vice President at RE / MAX Western Canada, real estate professionals have called on governments to beware of chilling measures such as policies and taxes that have served as short-term solutions in the past, but have not provided a long-term solution to the housing affordability crisis in Canada.

“Additionally, pandemic lockdowns have already had a huge impact on the supply of available-for-sale ads, so we urge our government to carefully consider any new measures that could potentially reduce supply even further,” says Alexander.

RE / MAX professionals have said that while governments cannot calm the overheated market with policies or taxes, they suggest the following ideas:

1. Proposal to add a mandatory condition to each offer, the completion of the purchase is conditional on financing:
“It would reduce buyer’s remorse and help ensure people can afford what they are buying.”

2. Proposal to institute an industry ‘watchdog’ to examine transactions where houses are sold well above the market price. ask for a price:
“This would ensure fair listing prices (not well below market value to create bidding wars). Officers who break these rules could face fines. “

3. Add more accommodations:
“It’s the real and only solution to our housing crisis. We need to further encourage the development of affordable family-sized housing, such as three-bedroom condos, and allow more isolated housing beyond our existing urban centers.

Alexander and Ash added that the country could not continue to fight against urban sprawl while expecting house prices to cool.

“It is not feasible. What we are currently seeing in the market are simple economics – low supply and high demand. We need more housing to meet the current needs of Canadians while anticipating the housing needs of the 1.2 million people expected to immigrate to Canada through 2023, ”the joint statement read.

“The time may have come to consider expanding the boundaries of developable land.

By now, the Bank of Canada has already publicly stated that there are early signs of overheating in the housing market, although despite these signs, policymakers do not plan to step in and address the interest rates until the economy and jobs are back on track after the declines caused by COVID.

However, Bank of Canada Governor Tiff Macklem said the situation should be monitored “Very closely” and that the bank will keep an eye on debt levels as mortgage debt increases as households pay off other debts like credit cards and personal loans.

All this raises the question, Is this the year the GTA real estate bubble bursts?

STOREYS editorial team

Written by
STOREYS editorial team

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