1) Supply is not the issue, demand is the issue: Many in the real estate and construction industry are calling for more supply. Of course, since this is their livelihood and their biased interests they are trying to pass off as the gospel for all Canadians. The focus should be on demand and this is where the federal government comes in.
2) Investors and speculators from outside of Canada to pay double the land transfer tax: , reduce for Canadians
3) Interest rates increase. With a staged approach this would certainly more than cool the real estate market as according to the media, Canadians on average have too much debt and a small increase in mortgage payments would be enough to push them into dire circumstances. However, with unemployment at 7.0% and a GDP running at 2.0%, it is impossible for Poloz and the Bank of Canada to justify such forecasted moves (as the US Fed has done).
In fact, this may only negatively impact Canadians who hold mortgages from Canadian banks and are subject to Canadian rates. Investors and speculators from outside of Canada in some cases are i) buying houses, condos for cash, ii) may not need a mortgage, iii) are obtaining more attractive interest rates elsewhere. Increasing Canadian rates...in Canada....will only render real estate prices perhaps slightly lower, which in the eyes of an out of country investor or speculator means "on sale!", and bid up again.
4) Investors and speculators from outside of Canada pay an increased level of property tax: Why should Canadians
5) Implement a capital gains tax upon a sale. Why should a foreigner be part of the same tax code as Canadians? Canadians receive proceeds from the sale of their home on a TAX FREE basis (or no Capital Gains tax) as this is the ONLY TAX FREE INVESTMENT VEHICLE left in Canada (other than our paltry TFSAs that Justin and the Liberals continue to render as paltry after nixing Harper's planned increases over the years to come). With this one financial windfall given where the real estate markets are currently, and Canada's doors wide open to the world to do the same - guess what is going to happen to real estate prices? INCREASE! Canada and the Canada Revenue Agency are throwing gas on its own house on fire!
6) And finally, "what goes up, must come down". Real estate markets today are different than the last lucrative days back in the 80s...and we all saw what happened after that cycle. CRASH! Interest rates were through the roof (no pun inteded), the decade was mired with the themes of excess and congolomerates, and a lot of investors and honest-to-goodness Canadians looking for a home saw their values drastically decrease and took decades to recover.
The message being, nothing wrong with renting, providing you are doing something with that difference in i) down payment, ii) repairs, iii) lack of renovations, etc you would normally have as a home owner. As one strategy (not recommended for everyone), invest this difference in dividend paying REITs (some are yielding a juicy 8%) and ride those dividend cheques (and capital appreciation). REITs too will have their day come up, when interest rates do take an increase, but when that time comes, housing prices will become cheaper.
The following charts are from today's Financial Post
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