Real es­tate run-up con­cerns econ­o­mist

Post City chats with Ben­jamin Tal, of CIBC World Mar­kets, about rentals and sky-high prices by Ron John­son

Bayview Post - - News -

Is there still a fi­nan­cial ad­van­tage to buy­ing a home in his red-hot real es­tate mar­ket with con­stant dou­ble-digit price in­creases, or is it now just bet­ter to rent? The rental mar­ket is ba­si­cally the so­lu­tion to the cri­sis. I think we have to see the propen­sity to rent ris­ing. I do be­lieve [more] peo­ple rent­ing should be a part of the so­lu­tion whether or not it is [in] the condo mar­ket or it is pur­pose built, which I think is go­ing to be a very im­por­tant part of the so­lu­tion.

Clearly in 2016 we have seen some ac­cel­er­a­tion in the mar­ket that suggests we are en­ter­ing a sit­u­a­tion in which there is some spec­u­la­tion in the mar­ket. Prob­a­bly for­eign in­vest­ment is larger than per­ceived.

Un­til 2015, it was easy to ex­plain most of the change in prices just by lack of sup­ply.

Clearly lack of sup­ply is still there, also in the condo mar­ket. But we have seen this tra­jec­tory in 2016 that makes me won­der what else is hap­pen­ing there in ad­di­tion to lack of sup­ply, es­pe­cially in the low-rise mar­ket.

Also prob­a­bly more de­mand in terms of spec­u­la­tion ac­tiv­i­ties, so I might be con­cerned about that. That’s why I think that one of the ways to solve the af­ford­abil­ity prob­lem and slow down the mar­ket is re­ally to in­crease the sup­ply of rental ac­tiv­ity, and pur­pose built should be part of it. Many big names in the fi­nan­cial world are call­ing the mar­ket a bub­ble. What’s your take? I think it is not pro­duc­tive to put names on any­thing. It serves no pur­pose. It’s not what is im­por­tant. What’s im­por­tant is what we do.

There is no ques­tion about the fact that we have an af­ford­abil­ity cri­sis or are ap­proach­ing an af­ford­abil­ity cri­sis in the city.

So I’m in­ter­ested in what we are go­ing to do about it, as op­posed to giv­ing it a name.

No­body knows what a bub­ble is, and giv­ing it a name is not pro­duc­tive.

To me, what we need to do is make sure we slow down the mar­ket.

So when the mar­ket is tested, namely when in­ter­est rates start ris­ing, we will pass this test. That’s why I sup­ported what the gov­ern­ment did in Oc­to­ber re­gard­ing mort­gage qual­i­fi­ca­tions and I will sup­port any in­crease in avail­abil­ity of rental ac­tiv­ity.

I will even sup­port fur­ther ac­tion as far as the gov­ern­ment is con­cerned com­ing from Fi­nance if needed.

I do be­lieve that we need to find a way to slow this mar­ket be­fore it is too late.

The pro­posed 29-storey Rose­hill Tower is an ex­am­ple of a new pur­pose-built rental, inset: CIBC econ­o­mist Ben­jamin Tal

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