Since last year, governments on diverse ranks have been going all out to come up with measures to bring down the housing market under control. The British Columbia government in August last year introduced a 15% tax on foreign buyers with the aim of cooling the market.
During that period the Ontario government was not in favor of such a tax, observing that it could have possible adverse effects on other neighboring markets. Nonetheless after several months of swift price surges in Toronto, the government decided to implement a similar tax to that of Vancouver.
Governments also presented other regulations including strict mortgage rules, which require people to go through stress tests, to determine if they can pay back their loan if there is to be any changes in the interest rates. A vacant home tax was also introduced.
Nevertheless all these market changes according to a prominent housing expert, stated that it is a bit scary that any minor change to the market can be very disadvantageous.
According to David Madani, senior Canadian economist at Capital Economics, it’s a great concern for him that policy makers might decide to make extra regulations with the aim of cooling home prices that are still rising.
He went on to give an example of this by pointing at the housing speculation tax, which has been appraising the media recently.
In a recent Economic Club of Canada panel debate, it was stated by the chief economist of the Canadian Real Estate Association, Gregory Klump that there are no signs that policymakers will stop making new rules any time soon.
He went on to say that a tax on speculators will most possibly be the next move, however this will not be a wise decision to make.
Madani went on to caution that this should be a worrying situation as such a condition that has previously occurred in the past in 1974 and crumbled the entire housing market. He added that he cannot get rid of the thought that history will once again repeat itself.
In a bid to cool home prices, the Ontario government in its 1974 budget under the guidance of Premier Bill Davis introduced a 50% land speculative tax and this intoxicated the housing market.
J C Loum