Time to address the real estate feeding frenzy

Until two years ago, Peterborough could look at the Toronto housing market and indulge in a little selfsatisfied smugness.

An average home price touching the $1 millionmark, bidding wars fuelled by desperate buyers, listings deliberately set well below actual value to keep the frenzy churning.

The reaction here, and in other communities outside the big city’s sphere of influence, was as expected: Who needs it, who wants it and how could it happen?

Prices here aren’t averaging $1 million, but increases over the past few months have been shocking. The average price for one of the 314 homes sold in March was nearly $750,000, a 45-per-cent increase in 12 months.

Any sense of smugness is gone, and those rhetorical questions have taken on real meaning.

Who needs it?

No one. Sellers, particularly older homeowners who are downsizing, do very well. But there is no “need” to profit at that level.

Who wants it?

Those same sellers might but might also be concerned about the ability of their children to buy a home. The real estate industry profits in the short term, but should have some misgivings about consumer backlash and future regulation.

How could it happen?

The answer is complex — in that there are a lot of moving parts — but clear. Toronto’s prices reacted to extremely low mortgage rates, high levels of disposable income as tech and financial sector jobs blossomed, the transfer of massive amounts of wealth from aging boomers to their adult children and renewed interest in city living over the suburbs.

Peterborough is feeling the effects of low interest rates and wealth transfer. And over time, it was always going to be the case that other factors would migrate through the GTA and arrive here in a diluted form.

COVID-19 put the migration in high gear. Retired city dwellers were already cashing out and moving to smaller cities. The ability to work remotely, the lifestyle benefits of a quieter more compact community and relatively affordable housing is now drawing younger singles and families.

No mystery there. Most of Southern Ontario is experiencing the same effect.

What to do about skyrocketing prices?

That’s the hard question. Slowing the inflow of buyers is not the answer and would be impossible anyway. Reducing demand by making it harder to buy a home is a possible solution. However, the minimum down payment requirement has already been doubled to 10 per cent of purchase price. Driving it higher would punish buyers, which is not the way to go.

Increasing the stock of housing would help. The City of Peterborough should consider adding planning staff and focusing on making the approval process for new housing as seamless as possible.

A quick and easy fix is clear to anyone recently involved in buying a home.

Toronto’s hot market spawned new seller-friendly, buyer-punishing sales tactics that have migrated here. Instead of back-and-forth negotiations with an individual buyer, sellers now set what is essentially a silent auction date.

Everyone submits a bid and the highest bid wins. No one knows what the competing bids were. Buyers pretty quickly learn that going all in is the only option. Regulations that ban secret bidding would make the process fair for both buyers and sellers.

It’s not a complete fix, but a simple and obvious one.