Speculation by Canadians ‘absolutely’ plays role in house prices on fire: expert – National
Speculation by Canadians investing in the real estate market is “absolutely” one of the factors contributing to soaring house prices, according to an economist who studies housing trends.
In an interview with The West Block Guest host David Akin, Mike Moffat of the University of Ottawa’s Smart Prosperity Institute said the focus on speculation by foreign buyers ignores the fact that domestic speculation is also part of the problem. .
“The ugly part is some of the metrics that they talk about as speculation, it’s a bit like blaming foreigners for our problems where, there’s a lot of domestic speculation going on,” he said.
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The federal Liberals have made housing unaffordability a central part of their 2021 campaign platform and in the months since have touted campaign promises and the recent budget that they say will help alleviate the crisis.
These measures include banning most foreign buyers for two years and imposing higher taxes on people who return properties within 12 months of buying them – part of growing efforts to target the financialisation of the market. Housing Canada.
Financialization is a term increasingly used to refer to investors who buy real estate – typically residential real estate that might otherwise serve as starter homes or affordable rental housing – and then treat them as financial assets to generate income. profits, either through resale or through increased rents.
Bank of Canada data from December 2021 showed that investors – what it defined as “primarily domestic buyers” – overtook first-time home buyers during the COVID-19 pandemic. And last week, Statistics Canada warned that many property buyers are “constraining” already tight supply in urban markets.
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But as Global News reported on April 13, a third of the Liberal cabinet owns rental or investment property assets, while at least 20% of MPs across all parties also own them.
Despite this, Trudeau declined to say whether he would consider measures such as taxing secondary or subsequent property purchases at a higher rate to deter speculation, and appeared to defend Canadians using real estate as an investment.
“Apparently it’s different if it’s national, it’s different if MPs do it,” Moffat said.
“I thought it was a bit problematic how they go after non-Canadians, where Canadians and non-Canadians absolutely play a role in our housing market.”
Moffat added that the commitment to build more homes is “fantastic”, but it’s more complicated than it looks.
Part of that, he said, is because much of the responsibility lies with provincial and municipal jurisdictions, amplified by a shortage of skilled trades workers and “bottlenecks” on supplies.
As a result, he said Prime Minister Justin Trudeau and Conservative leadership candidate Pierre Poilievre – who is among dozens of MPs who own rental or investment properties – have recently proposed measures from the carrot and stick.
These aim to incentivize or impose consequences on municipalities based on whether their officials approve new building permits and relax zoning restrictions that stand in the way of new homes.
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A big question remains as to whether interest rate hikes by the Bank of Canada will be able to cool demand in a market that has been practically foaming at the mouth for two years.
Inflation is currently at 6.7%, “higher than everyone expected,” Moffat said, pointing to growing speculation about the potential stemming from a 75-point rate hike in June.
“If that happens on June 1, you’re going to see a lot of people stepping back and saying, ‘OK, you know what? Maybe I don’t want to take out that five-year mortgage, buy that new house, because interest rates are so high.
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