Provinces from B.C. to Nova Scotia are rolling out a wave of new measures aimed at reining in rampant home price appreciation, but many in the real estate industry question whether the moves alone will be enough to tame the country’s housing dragon.
A Bank of Montreal report last week, authored by economist Robert Kavcic, characterized the latest policy changes and the Bank of Canada’s anticipated interest rate moves as a “full-scale attack on Canada home prices.”
Among the new measures is a cooling off period introduced in B.C., that would give buyers an unspecified amount of time to be revealed later this year to change their minds after making an offer, leeway to pursue a home inspection or perform other due diligence.
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Ontario, meanwhile, increased its non-resident speculation tax to 20 per cent and expanded its coverage across the province. Nova Scotia also set its sights on non-resident taxes as more demand comes in from outside the province.
When asked directly if the cooling off period would slow B.C.’s hot housing market, Elton Ash, executive vice president at RE/MAX, offered a blunt “No.”
“The whole measure as the government is proposing is flawed,” Ash told the Financial Post, because a buyer can rescind their offer on a home, leaving the seller in the lurch.
“Ultimately, to realistically work towards controlling price appreciation, it’s supply. That’s purely what it is,” Ash said.
A similar measure had been previously rolled out for pre-construction condominiums, allowing buyers a seven-day period to reconsider their decision. While Ash said the measure had no impact on condo valuations, it would be an apples to oranges comparison with the resale housing market.
“Of course, the reason it’s in there is to allow consumers a sober second thought as opposed to the hard sell tactics of a developer,” Ash said. “It’s a different environment.”
What Ash and other B.C. real estate professionals proposed instead was a five-day pre-offer period that would allow buyers to do their due diligence with property inspections, financing, appraisals, etc. Ash said this could remove unneeded stress from both the buyer and the seller.
Steve Saretsky, a real estate specialist at the Vancouver-based Saretsky Group, said the government’s aim should be to promote transparency in the house-hunting process, something that would ease the competitive frenzy that leads buyers to make rash decisions. The cooling off period, he said, could come with some unintended consequences.
“I think it has the potential to backfire because you basically create a situation where maybe if everybody has a seven-day rescission period and you can use that to back out, you can basically just go and tie up two, three properties at a time to figure out which one that you want,” Saretsky told the Post. “If you’re looking to create ‘more affordable housing’, I’m not sure this is actually going to help create a more affordable housing market.”
In Ontario, Premier Doug Ford’s government increased the non-resident speculation tax from 15 to 20 per cent and expanded the measure throughout the province as opposed to focusing on the Greater Golden Horseshoe region.
For John Pasalis, president of Toronto-based real estate analytics firm Realosophy Realty Inc., the policy focus should be on creating more supply.
It’s still a seller’s market, but we’re just starting to see a lot less competition
“I don’t think these foreign buyer taxes … are bad, they’re just not the solution,” Pasalis said. “Certainly, the bigger policies that the provinces can be focusing on are things like obviously increasing density, adding supply, probably doing some sort of provincial ban on things like Airbnb — those types of things.”
Pasalis added that there is a continued mismatch with the federal government’s plan to rapidly grow the population through immigration and the province’s lag in creating sufficient supply to house them.
“It’s this disconnect that’s kind of really causing a lot of the problems we are seeing with high home prices,” he said.
However, Pasalis noted that he’s seeing some of the heat come out of the market already after demand was pulled forward ahead of rising mortgage rates. Pasalis added that listings volumes are increasing and buyers are starting to sit on the sidelines amid rising rates.
“It’s still a seller’s market, but we’re just starting to see a lot less competition,” he said.
In Nova Scotia, meanwhile, the provincial budget outlined a plan to implement a five per cent non-resident buyer tax as well as a two per cent annual property tax on non-resident owners of properties with three or fewer units (unless they are rented out to a local).
Even with a pandemic-fuelled rise in interprovincial migration that saw buyers move from hot markets like Toronto and Vancouver to more reasonably priced Atlantic markets, Nova Scotia-based Re/Max broker Ryan Hartlen does not believe the influx of out-of-province buyers is strong enough to make the tax a game-changer.
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“We don’t see this as a big enough segment of the market that it’s going to have a material impact,” Hartlen said. “I mean, we might see some ripples through the industry as people adjust to it … but most of the buyers, even most of the non-Nova Scotia buyers that are buying properties here, have full intentions of moving here.”
While the real estate industry is not holding its breath on the recent measures the provinces have in store to tackle high home prices, they tend to agree that bringing more supply onto the market and encouraging more cohesion between all levels of government for geographically targeted solutions are what’s needed — not more tax-related measures.
“I think the only thing realistic is trying to have some sort of plan and set out in place to work with municipalities to actually get supply built,” Saretsky said. “In terms of federal budget … I wouldn’t mind seeing them make a further commitment to increasing rental housing supply.”
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