While initiatives to curb the out-of-control price growth in Canada’s most in-demand housing markets have been proposed at the federal level, an industry analyst argued that solely working to address the influx of overseas money in the country’s real estate sector would miss the forest for the trees.
In a June 7 interview with BNN
, Gluskin Sheff + Associates chief economist and strategist David Rosenberg noted that the undue focus on foreign investors—which have been blamed by various quarter for non-stop price increases in Toronto and Vancouver—would not led to an effective strategy for cooling down the markets.
“The next question really is, what are we going to do about it? We are a small open economy. We welcome foreign investment. We expect that other countries are going to allow us to invest in their economies as well,” Rosenberg said. "So it’s something that I think pays to monitor, but what are going to do about it?”
Rosenberg stated that the current discourse surrounding the overheated markets is missing a crucial piece of the puzzle.
“I think that the problem is that all the efforts have so far been on the demand side, whether it’s been through tinkering through CMHC guidelines, down payment requirements, moral suasion on the banks to curb their mortgage growth. But there’s very little attention paid to the supply side,” the economist said.
“The question really is why are these markets still so exceedingly tight? So we can talk about foreign interest in Canadian property, especially in [Toronto and Vancouver], but where is the emphasis on zoning regulations, on making incentives to increase building approvals, on making it easier for the builders to respond to this strong demand?” Rosenberg asked.
Most worryingly, the analyst said, is the trend towards seeing preventive strategies such as foreign buyers’ taxes as a panacea for the affordability crisis.
“I fail to see how [these measures are] going to be successful in this respect. You are talking about inherently non-price sensitive entities coming into the marketplace. They’re still buying as many units with prices on average over $1.2 million in Vancouver as they were a year ago when prices were 30 per cent lower,” he explained. “So certainly you can tax these individuals, but that’s not going to address the underlying problem—which is the supply problem.”