Blind bidding should be cut to cool housing market: National Bank CEO
National Bank of Canada Chief Executive Officer Louis Vachon said the country should consider ending blind bidding to cool the nation’s housing market while also studying broader pandemic-related factors that may be driving the recent home-price surge.
Provincial and industry regulators should look at regulating or forbidding blind bidding to increase price transparency and make it harder for buyers to waive certain rights in their purchase offers, Vachon said at the bank’s annual meeting Friday. To make offers more appealing to sellers, many shoppers in Canada are giving up rights to home inspections and removing clauses that protect them if they’re unable to arrange financing for the purchase.
“These policies could better protect buyers and may slow the velocity of the current real estate market,” said Vachon. He also said changes to mortgage underwriting criteria may be needed over the next six to 12 months.
Over the longer term, Canada should conduct large-scale surveys and polls on whether certain market changes brought on by the pandemic will be permanent and how to address them, he said. The factors he mentioned are whether baby boomers will resume selling single-family homes after the pandemic, the role that parental support plays in financing current buyers and whether the work-from-home phenomenon that has broadened real estate demand to wider geographic areas will persist.
“The bursting of a speculative bubble in this segment of the economy would have very negative social and economic consequences,” Vachon said. “Policy makers and bankers in this country are, in my view, fully aware of this.”