The Bank of Montreal’s CEO is contemplating on the results that would originate from a conceivable adjustment in house costs, saying that the housing market “basically mends itself.”
Bill Downe says that when house costs decrease, individuals shy away from the market and play a very dormant role in the housing activity to arrange and pay down their loans which essentially enables the market to heal.
Downe went on to observe that such a similar happening took place during the last housing correction in the U.S and in spite of the fact that the circumstance in Canada is distinctive; the result would likely be the same.
He made his remarks taking after a discourse he conveyed to the Canadian Club of Toronto.
Lately, the OECD and the IMF have both requested for greater government involvement to get control over quickly rising house costs in urban communities, for example, Toronto and Vancouver.
The housing situation in both cites call for an urgent need of solutions notwithstanding the fact that several measures have previously being taken to cool the housing market.
In April the Ontario government followed the footsteps of the British Columbia government to introduce a 15% tax on foreign buyers to help cool the market. But recent data has shown that the housing market in Vancouver is recovering months after the tax was first initiated.
But for many housing experts, focusing on foreign buyers will not solve the housing crisis as there are other variables that are affecting the housing prices that need to be dealt with. If these factors are not taken care of, both Vancouver and Toronto will continue to see an increase in home prices.
There are still factors such as low interest rates, slow building permit process and so on that still fuels home prices as the demand for homes remain high while supply is tagging along at a slower pace.
In some way, the supply end of the market is what governments should mainly be concerned about and not on the demand side because come what may, people will still need homes to live in.
In any case, Downe said the measures presented as of late by the Ontario government – including a 15 % for international buyers require time to take their effect on the market.
But these measures taken are also affecting sales which have declined as buyers are waiting out to see the new regulations and work their way through the housing market.