While Finance Minister Bill Morneau conducts his “deep dive” into Canada’s housing sector with a new working group, what the country’s overheated housing markets really needs is more action from the Canada Mortgage Housing Corporation, according to economist David Rosenberg.
With the Bank of Canada unlikely to raise interest rates any time soon, Gluskin Sheff’s chief economist and strategist said the CMHC should step up as a “lever” for curbing excess housing demand.
“The cost of credit is extremely cheap,” Rosenberg told BNN in an interview. “So the question is, why don’t you use CMHC as the lever in terms of constraining credit? Especially at the mid- to high-end part of the market, in terms of downpayment requirements, in terms of credit stringency? To me, that would be the natural answer for the rest of the country [outside of Vancouver].”
Rosenberg added that he’s skeptical that Vancouver’s new 15-per-cent foreign homebuyers tax will help ease the city’s red-hot housing prices. Vancouver is a “real special situation” compared with other Canadian markets, where Rosenberg said is “wholly influenced” by foreign buyers, particularly from China and Asia.
“When you think about it, home prices in Vancouver are up 30 per cent in the past year and that didn’t really deter any buyers from Asia from coming into the market place,” he said.
“Maybe it will have some marginal effect in terms of housing demand and prices, but you have to ask yourself the question, what does 15 per cent do that 30 per cent in the past year didn’t do?”
Meanwhile, debate over whether Ontario should take similar action as B.C. has been heating up. Ontario Finance Minister Charles Sousa told BNN in an interview last week that the province was looking closely at B.C.’s new levy, adding that the province may “make a decision that may temper the Toronto market” without providing any specifics.
Yet, even as home prices in Toronto have risen 15 per cent year over year, it may not require a tax on foreign nationals similar to that in Vancouver, said Rosenberg.
“That’s not all foreign money coming [into Toronto’s housing market] – a lot of it is local,” said Rosenberg, who previously described the Toronto market as a “sud” compared to Vancouver’s “bubble.”
“If we’re talking about a response outside the special situation of Vancouver, I would say use CMHC as a lever.”