The Blame Should not be on Foreign Buyers but Rather on Speculators
It is such a funny situation that the government is going all out to stop foreign investors from further driving home prices in the Canadian real estate market but very little is done to address market speculators who invoke panic in the market which drives buyers to make higher demands for homes for fear that home prices will further increase. This in turns results to sellers increasing their asking prices.
Market speculators have also caused a massive increase in bidding wars across leading housing markets which in a way affect home prices as buyers are willing to make outrageous home prices.
Even though many Canadians are wondering why they are finding it difficult to buy a home, the answer is quite simple. Real estate speculators are a driving force hindering prospective buyers as they purchase homes and make expensive resales.
Speculators gain a lot from the housing market as they pay very little tax while preventing a large number of people out of the market.
In the recent past, many Canadians had the perception that market speculators are foreign individuals but there have been increasing evidences which indicates that speculators are mainly Canadians.
Although housing constructors argue that supply is the main issue that affects home prices as buyers have very little options to choose from, reports shows that in Metro Vancouver last year, housing units were built for an estimated number of people who are expected to move to the city which meant that the city region is probably building more units than required.
Despite this increase in new listings, home prices continue to soar and according to reports from the RBC Royal Bank, home prices are most likely driven by buyers who are with the perception that there will be further price increment. Simply put, it implies that speculators are misguiding people who are in need of homes.
This leads to the million dollar question. Who are these market speculators? Last year, the British Columbia government introduced a 15% tax on foreign buyers which led to a decrease in foreign investor’s activity in the housing market but this decline is not reflected in the housing market as home prices remain the same.
The answer to this issue lies on speculators for whom the government on all levels neglect to address as they are distracted with tackling foreign investors.
NDP housing critic David Eby noted that Canadians are also not helping the situation as they are creating a platform for market speculators to increase. Low interests of banks is one way that speculators gain from the situation as they get to receive large loans to enter the housing market which in turn adds to home prices.
There is yet to be statistics on the number of Canadian speculators in the housing market versus foreign speculators.
Nevertheless, the federal government is making moves to put a stop to market speculators with several strict mortgage regulations that make it difficult for people to get loans.
