guelphite
Hero Member
- Jan 22, 2021
- 303
- Category........
- FSW
- NOC Code......
- 2173
- AOR Received.
- 28-10-2020
- Med's Request
- 03-12-2020
- Med's Done....
- 07-01-2020
There are both supply and demand issues.
Supply: we have not built nearly enough houses for how much population growth we have had. This is mostly due to terrible government policies at local level that add a bunch of taxes and time-intensive approval processes to new development. Zoning is also an issue - developers are prevented from building denser housing in cities because of it. Provincial and federal governments have the power to address these causes but have not done so. Of course high immigration has exacerbated this problem.
Demand: Canada has very lax policies on investors in the housing market. This is an issue for both domestic and foreign investors. Many countries do not allow foreign non-resident investment in real estate but Canada does and has few restrictions on it. Also, many permanent residents come from wealthy families and receive huge gifts from parents to buy property, so just preventing foreign non-resident ownership would not remove foreign money from the system. Domestic investors are also a huge problem - many boomers own multiple properties and are essentially hoarding houses that young people need. There are tax incentives for investors - no capital gains tax on primary residences, and property taxes are very low on second, third houses. Finally, there are low interest rates, which increase demand by lowering carrying costs.
Both are very important. I think the supply issue is primary. If the government suddenly penalized domestic and foreign investors (demand-side policies) by increasing taxes on investment properties and forbidding foreign non-residents from owning property, they could certainly push house prices down. Obviously raising rates would do the same in the short term. But due to the supply issues anything that pushed investors to sell their houses would raise rents by removing rental supply.
