In an interview with The West Block guest host David Akin, Mike Moffat of the University of Ottawa’s Smart Prosperity Institute said the focus on speculation by foreign buyers ignores the fact that domestic speculation is part of the problem, too.
“The ugly part is some of the measures that they talk about as speculation, it gets a little bit into blaming foreigners for our issues where, there’s a lot of domestic speculation that’s going on,” he said.
The federal Liberals made housing unaffordability a central plank in their 2021 campaign platform and in the months since, have touted the promises made in the campaign and the recent budget that they say will help to ease the crunch.
Those measures include banning most foreign buyers for two years and imposing higher taxes on people who flip properties within 12 months of buying them — part of growing efforts to target the financialization of the Canadian housing market.
Financialization is a term increasingly being used in reference to investors buying up real estate — typically residential real estate that could otherwise serve as starter homes or affordable rental units — and then treating those as financial assets to generate profit, either through resale or raising rents.
Bank of Canada data from December 2021 showed investors — what it defined as “mainly domestic buyers” — outpaced first-time homebuyers during the COVID-19 pandemic. And last week, Statistics Canada warned multiple property buyers are “constraining” already tight supplies in urban markets.
But as Global News reported on April 13, one-third of the Liberal cabinet owns rental or investment real estate assets while at least 20 per cent of MPs from all parties do as well.
Despite that, Trudeau has refused to say whether he would consider measures like taxing secondary or subsequent property purchases at a higher rate to deter speculation, and has appeared to defend Canadians using real estate as an investment.
“Apparently it’s different if it’s domestic, it’s different if MPs do it,” said Moffat.
“I thought that was a little bit problematic how they’re kind of pinning it on non-Canadians, where both Canadians and non-Canadians absolutely play a role in our housing market.”
Moffat added the pledge to build more homes is “fantastic,” but that it’s more complicated than it seems.
Part of that, he said, is because much of the responsibility lies in the hands of provincial and municipal jurisdictions, amplified by a lack of workers in skilled trades and “bottlenecks” on supplies.
As a result, he said both Prime Minister Justin Trudeau and Conservative leadership candidate Pierre Poilievre — who is among the dozens of MPs who own rental or investment property — have recently proposed are carrot-and-stick measures.
Those aim to either incentivize or impose consequences on municipalities based on whether their officials approve new building permits and ease zoning restrictions standing in the way of new homes.
A major question remains about whether interest rate hikes by the Bank of Canada will be able to cool demand in a market that’s been practically frothing at the mouth for the past two years.
Inflation is currently running at 6.7 per cent — “higher than anybody was expecting,” Moffat said, pointing to growing speculation about the resulting potential for a 75-point rate hike in June.
“If that happens on June 1, you’re going to see a lot of people pull back and go, ‘OK, you know what? Maybe I don’t want to take out that five-year mortgage, buy that new home, given how expensive interest rates are going to be.'”