The seemingly unstoppable overheating of Canada’s residential property market is making the most in-demand cities more difficult places to live in for the long term, and authorities should consider taking stronger steps to address the problem, a leading economist and industry analyst said.
“The housing markets in Toronto and Vancouver specifically are unsustainable,” Gluskin Sheff chief economist and strategist David Rosenberg said in a recent Bloomberg
“I’m not saying it’s around the corner, but the markets are extremely expensive and the Bank of Canada is not going to raise interest rates,” Rosenberg stated, adding that the deflationary global climate post-Brexit means that bond yields will drop even further and prices will increase more quickly.
Rosenberg noted that if he had a property in Vancouver or Toronto, he would be selling one right now due to the unprecedented heights that real estate costs have reached over the past few years.
Housing starts in Vancouver alone reached a 25-year record high in February, and even this has failed to stifle ever-increasing demand from wealthy buyers looking to park their money into investment properties
Rosenberg compared the steps taken by the CMHC such as rationing credit and tightening eligibility criteria to a “wrench”, a gradual approach that hasn’t had much of an impact yet.
The economist also voiced uncertainty over the government’s willingness to step in with more drastic action, although recent statements might indicate that federal authorities are moving towards the imposition of such measures.
“Now that they’ve started to identify speculative behaviour in these high-priced markets, will the federal government come in with some sort of tax?” Rosenberg mused.
“Remember, we’re talking about two markets that are in overheated terrain. Vancouver’s in an outright bubble; everybody knows that. So it’s not the overall Canadian housing market, but my sense is that you can either [cool down the markets] through interest rates or through credit rationing, which the CMHC has already started doing,” he said.
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