Toronto’s mayor said on Thursday he’s not going to rush into a policy decision about his city’s red-hot housing market, despite heightened scrutiny after British Columbia intervened to cool the country’s other housing hot spot.
“I am not going to, at this stage, state that I have reached a conclusion myself based on what’s going on anywhere, including Vancouver, that any particular tool or mechanism should be used to try to cool off housing prices,” Tory said in response to a question from BNN.
“It’s a complicated matter, you’re dealing with a market place – governments can only macro manage things, not micro manage them.”
The British Columbia government’s decision to tax foreign homebuyers has triggered a debate over whether Ontario needs to follow suit, but David Rosenberg isn’t so sure.
“Toronto real estate is a giant sud compared to the bubble in Vancouver,” the chief economist and strategist at Gluskin Sheff and Associates said in an email to BNN.
Rosenberg argues Toronto can loosen supply constraints rather than rely on taxing foreign buyers. The Vancouver market, however, “is wholly influenced by Chinese money coming in, price-insensitive buyers for the most part, and how much of it is laundered is anyone’s guess,” he said.
Rosenberg added that the onus should be on the Canada Mortgage and Housing Corporation to intervene by tightening standards on more expensive homes.
While the debate heats up over whether Ontario should take similar action as B.C., Ontario Finance Minister Charles Sousa told BNN on Wednesday the province might “make a decision that may temper the Toronto market,” but declined to provide specifics on what’s being contemplated.
Sousa also acknowledged that his province was caught by surprise by B.C.’s new 15 per cent levy on foreign home buyers.
"No, B.C. proceeded to introduce this without our advisement," Sousa said.
Ottawa cobbled together a group consisting of representatives from the federal government, the B.C. and Ontario provincial governments and the cities of Vancouver and Toronto in June. At the time, the federal government said the group would "meet throughout the summer" to discuss housing market stability.
B.C. Premier Christy Clark announced her province’s intervention strategy this week. Since that announcement was made, some observers have wondered whether foreign buyers will skip over B.C. and ramp up investment in Toronto's already-hot market.
"We're assessing what the impact may be," Sousa said about that risk.
While the B.C. tax caught many flat-footed, that isn’t necessarily a bad thing, according to First Avenue Advisory Portfolio Manager Kash Pashootan.
“In a perfect world, communication is a good thing,” he told BNN in an interview. “The challenge is that you run the risk of it leaking before it should. You’re stuck between a rock and a hard place, and the safe approach would have been to keep it hush-hush and come to market.”
As Ontario weighs various options to cool its overheated housing markets, Sousa said he wants to make sure foreign capital isn’t scared off.
"So while we may make a decision that may temper the Toronto market," Sousa said, "what does that mean then for the surrounding areas? ... There are consequences from those decisions, so we want to make certain they're the right ones."
Toronto Mayor Tory said Thursday he has faith in the process that federal Finance Minister Bill Morneau triggered by forming the working group on housing, and that so far nobody has brought him recommendations on what can be done about Toronto’s surging home prices.
“I think in the end what people want to know is this: they want to know that if we’re going to do anything, that it’s going to be effective – not that we’re going to do something for kind of show business or political purposes – or even for revenue-generating purposes.”
If the Ontario government wants to take some of the heat out of the market, Laurentian Bank Securities Chief Economist Sébastien Lavoie shared a number of policy prescriptions with BNN:
- Allow foreign buyers to purchase a home only if an equal number of units are added to the market
- Cap the ratio of new condo pre-sales for foreign buyers
- Legislation that would force foreign buyers to sell their property within a fixed time if it’s not a primary residence
- Introduce a similar tax to B.C.s’ 15 per cent levy on foreign buyers; however, a 5-10 per cent rate might suffice