Veteran Bay Street investor Barry Schwartz is expressing doubt Canadian policymakers will be able to put the brakes on Toronto’s hot housing market. In an interview on BNN, Schwartz, the Chief Investment Officer at Baskin Wealth Management, said a lack of action earlier in the housing cycle is undermining his confidence in any constructive moves stemming from tomorrow’s meeting of Federal Finance Minister Bill Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory.
“I’m not so sure they’re well-suited to make smart decisions, because they’ve let it go for so long,” he said. “It’s not easy: we’re in a free-market society, but we don’t want to end up with what happened in 2008 [in] the United States.”
Schwartz said it’s unlikely one single policy move can quell the meteoric price gains, and that legislators will likely have to apply a series of measures.
“It’s a serious situation: I think they’ll have to attack it on a lot of different levels, and they’ll have to maybe do incremental changes,” he said. “When you’re having bidding wars [on] dump houses for 40, 50 per cent over asking, that tells you supply is stressed, that tells you that there’s huge demand, interest rates are so low, people are scared about investing in other stuff, the population’s growing.”
Schwartz said having an expensive housing market is not necessarily a bad thing, but that prices have just run too far, too fast.
“Having a rising [housing] market is a very positive sign, and it puts us up with the rest of the world, and on a valuation basis it’s only the 14th most expensive city,” he said. “The problem is that it rose too fast, too soon, and that’s what scares everybody.”
Schwartz said policymakers should have been prepared for this as soon as British Columbia levied additional taxes on foreign homebuyers.
“It didn’t take a genius to see this coming: as soon as they shut down Vancouver, everybody said it was going to happen in Toronto,” he said.
Schwartz said he thinks the home-price appreciation party is set to end soon, as increases outstrip the ability for prospective homebuyers to obtain mortgages, but he isn’t willing to bet against the market over the medium to long term.
“I think if you’re going to sell your house, this is the peak, but I wouldn’t be surprised, three to five years from now seeing house prices more expensive than they are today. It’s just going to be the way it is.”