Finance Minister Sousa to unveil 16 measures to help cool Toronto Real Estate market.
Let’s hope at least one of these measures addresses the real problem…the way biding wars and pre-emptive (aka bully) offers are handled by listing brokers.
Yesterday all levels of government met to discuss measures they can take to help “cool” Toronto’s Real Estate market. Now, if you read my post last week you understand my position (that there’s no housing crisis and there’s no bubble)….and if we’re not on the same page, that’s cool. You and Garth Turner can go hang and trade stories about how messed up everything is.
But before we get in to everything that is wrong. Let me quickly guide you through where I think the real change needs to happen. In house. The Real Estate industry needs a serious internal audit. Prices are high (and will continue to be high) but we need to do a much better job of managing the bidding war process to prevent gross overpayments. The “crazy” numbers some folks feel they need to come up with to end their Buyer pain.
How can we make a change?
The market does need help. Most of the help and change is needed within the industry. Unethical sales reps and brokers. Changes to the way bidding wars are handled would be a great start. Stopping the “You know, it’s close so your buyer is going to have to come up” even though you may already be in the lead. Keeping buyers in the game even though they’ve already been outbid just to drive up the top offer price. Let’s start here to fix the market (Tim Hudak you’ve got a seat at this table, ready to take a stand here?)
I’d love to regurgitate what what was said in the meeting…but ain’t nobody got time for that. I’d like to instead, pick apart one comment Ontario Finance Minister, Mr. Sousa, made that shows the absurdity of what’s being talked about now and how misguided the conversations actually is.
“The fundamental problem is that housing prices are not only high, they’ve increased too dramatically. While I recognize that market forces will prevail, there is urgency in dealing with this spike,” Sousa said
Let’s break it down.
“The fundamental problem is that housing prices are not only high, they’ve increased too dramatically.”
We’re talking about a City that is trying to find a “new normal” and once that new level is established the market will calm. Housing prices are high but Toronto is massively in demand…that will never change therefore prices will always be high (of course there will be fluctuations along the way).
This leads to the next part of the Sousa’s comment: “While I recognize that market forces will prevail”
Meaning: The market will eventually settle as the “new normal” is set but we’re going to mess with it anyway
Lastly: “There’s urgency in dealing with this spike”
Key word: SPIKE. It wouldn’t be called a spike if it kept going up. We call that a straight line. A spike means there’s some sort of gain then a levelling off or decline (don’t get too excited there you pessimists…I’m not using the word “decline” as a synonym for crash).
So what Sousa is saying here is that we’ve had a massive increase in prices and Toronto homes are expensive. A whole bunch of people who are having trouble getting into the market (rental or buy) and are unwilling to adapt to new market conditions. They’re putting serious pressure on their politicians to take action with a false belief that the government (at any level) has the ability to “make properties affordable again”. I think you’d have an easier time making America great again.
I guess there is a way….
I guess the above statement isn’t entirely true. Government can make homes more affordable again. They can do this by jacking up interest rates. Do that and prices will drop…except there’s one problem…nobody would be able to buy them because they wouldn’t’ qualify for the loans (but the rich would scoop up as much as possible). Jacking interest rates helps one group and one group only: The 1%. The people with the money to lend. The banks, the rich the private lenders. People with money made a killing in the early 90’s.
The only thing all levels of government are doing here is trying to find a new way to collect more tax dollars and take advantage of a growing market and of course disguise it all as “helping the average Torontonian” earning (buying?) votes for the next election. We’re going to expect an increase in capital gains tax, a front end foreign buyer tax (we already have one on the backend), and a slew of other changes that will not do much to “make properties affordable again” in the long term.