John Horgan’s New Democrats wasted no time in ratcheting up the British Columbian government’s approach to cooling the province’s hottest housing markets. In Horgan’s first provincial budget since forming the government late last year, the province unveiled 30 measures designed to cool down the market.
It’s just the latest move Canadian lawmakers and regulators have taken in a bid to bolster stability, and in some cases affordability, in Canadian housing. So BNN spoke with John Pasalis, the president of Toronto-based independent brokerage Realosophy Realty, to see how he would grade the efforts of regulators and legislators thus far.
WHAT BRITISH COLUMBIA DID:
B.C. kicked off a wave of regulatory action in 2016, when Christy Clark’s Liberals brought in a 15-per-cent tax on foreign homebuyers in Vancouver in a bid to rein in the speculation many blamed for driving average prices out of reach for middle-class British Columbians.
Among the measures brought in by the new provincial government, B.C. will increase that tax’s size and breadth, applying a 20-per-cent tax on foreign homebuyers not only in Vancouver, but as far afield as Victoria and Kelowna. In addition, the province will introduce a real estate speculation tax on domestic and foreign buyers this fall and increase taxes on homes worth more than $3 million.
Pasalis’ grade: A
“It was well-thought out. They have a lot of measures there, it’s not just one thing [to deal with] the demand side,” he told BNN. “I think [the demand side] is a bigger issue in B.C., so it’s good that they’re really tackling it head on.”
WHAT ONTARIO DID:
Ontario broke out 16 measures of its own in April 2017, including matching British Columbia by implementing a 15-per-cent levy on foreign homebuyers in the Greater Toronto Area. The province also expanded rent controls, gave municipalities more tools to encourage development, and bolstered efforts to better understand excessive speculation in the housing market. The province hasn’t pulled any additional policy levers since then, but a chill did settle over the Toronto market in the wake of the changes.
Pasalis’ grade: B-
“They didn’t really do anything that addresses speculation in the housing market,” he said. “Having said that, you don’t know how markets are going to react. It was a bit of a shock that Ontarians reacted the way it did to the policies that were introduced. There was no logic to it, it was all emotional.”
WHAT QUEBEC DID:
Very little. Finance Minister Carlos Leitão said repeatedly the province was keeping a close eye on the impact of foreign homebuyers on the Montreal market, but hadn’t seen reason to pull the trigger on legislative changes yet. However, newly-elected Montreal Mayor Valérie Plante wants the power to introduce a foreign buyers’ tax on residential real estate, giving her the ability to rapidly react if the market overheats. Of note, Canada Mortgage and Housing Corporation said in a December report the share of condos in Downtown Montreal owned by non-residents rose to 7.6 per cent in 2017 from 4.3 per cent in 2016.
Pasalis’ grade: B
“You don’t introduce these types of policies unless you need to; just because there’s a little foreign investment in your housing market, well, that’s not bad,” he said. “I don’t think it’s bad that they’re waiting, these are policies you introduce when you have to. Affordability in Toronto and Vancouver is way worse than it is in Montreal. It’s a bit of a joke what houses cost there compared to [Toronto.]”
WHAT OSFI DID:
Canada’s banking watchdog sent a chill through housing markets to start 2018, after bringing new mortgage stress tests into effect on New Year’s Day. The Office of the Superintendent of Financial Institutions’ regulations require buyers putting up 20 per cent or more as a down payment to prove they could carry their mortgage at 200 basis points higher than the posted rate or the Bank of Canada five-year benchmark rate, whichever is higher. The move is estimated to cut the buying power of Canadians looking for a new home by as much as 18 per cent.
Pasalis’ grade: B
“I’m very conflicted. My instinct is, it was probably too much at once. I don’t think it’s great to introduce huge shocks like that. I think it would have been better if they had phased it, but that’s probably my only critique,” he said. “Overall, I think we should have had something like that years ago, and I think it would have helped if we had that years ago. Overall, I think it’s a good policy.”