Premier Kathleen Wynne surprised the market the other day by announcing sweeping measures aimed at cooling the red-hot housing market a full week before Ontario Budget Day. The sixteen-measure package is largely intended to do three things: Cool demand; boost supply; and limit the increases in rents.
The Ontario government’s efforts to cool off the housing market will hopefully succeed, but don’t expect a big or immediate impact. The most important elements of the 16 point plan involve targeting people who are market speculators. Speculators are buying into real estate for reasons that don’t reflect true property demand, and so they are artificially inflating demand. Unlike regular property owners who are buying to live in the home, speculators are buying only for capital appreciation. Whenever a market of any sort attracts this kind of behaviour, the market is risking a bubble.
The tax on foreign (non-Canadian and non-resident buyers) will have an effect to discourage that kind of behaviour but it will likely be minor effort as there is a low proportion of total buyers that would be affected. The ability fo municipalities to tax owners of vacant property will likewise help, in areas such as Oakville, but again the proportion of total transactions affected will be small. I’d say overall the property price growth cannot continue too much longer, but I don’t expect a price reduction More likely, we’ll see a cooling off of the growth of prices, and hopefully get back to the 5-8% per year rate that historically made real estate a safe investment for home owners.
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By Dr. Sheila Cooper