LePage warns of ‘market whiplash’ in housing

Industry concerned about government rules on Toronto housing market

Concerns that government is going to slap more rules on the housing market, particularly aimed at Toronto’s residential sector, appear to be growing among the real estate industry.

Royal LePage joined the chorus of those advising that Ottawa and its provincial counterparts should tread cautiously before considering everything from rent control to a tax on foreign investors.

“An unfortunate side-effect of heavy-handed government regulatory intervention is that we risk market whiplash,” Phil Soper, chief executive and president of LePage, said in a statement.

“In the coming weeks, it is possible that six months of pent-up demand will be unleashed on the market, sending prices sharply upward again; this when the pre-intervention 2016 trend was a natural market slowdown based on eroding affordability.”

The comments from Soper were released Tuesday before a meeting between federal finance minister Bill Morneau, Ontario Finance Minister Charles Sousa, and Toronto Mayor John Tory, who has talked about his city implementing a vacant home tax like the one brought into Vancouver this year. That tax is said to be aimed at foreign buyers and speculators buying units, but not renting them out.

Soper took aim at the British Columbia government’s foreign buyer tax, which slapped an additional 15 per cent levy on out-of-country buyers in the Vancouver region as of Aug. 2.

“For weeks now, we have witnessed a steady fall in real estate values in the Lower Mainland, with sales activity down some 40 per cent compared to recent norms,” he said. “There is now reason to believe that the market correction underway in Vancouver may be short-lived.”

The main victims of the B.C. tax were Canadians who had planned to sell or buy a home, but held off because of the fear the investment from Chinese buyers was driving the market and responsible for a housing shortage, Soper said.

“The reality is that as much as 90 per cent of the housing activity that disappeared overnight in the Lower Mainland after the tax was introduced was from Canadian residents, not foreign investors. Homebuyers are waking up to this reality and may be ready to rush back into the market,” he said.

Data from the Toronto Real Estate Board this month showed prices in Canada’s largest city were up 33 per cent in March from a year ago, but Soper thinks government needs to proceed slowly. TREB has also said its own study has found about five per cent of the Greater Toronto Area market can be traced to foreign buyers.

“The hasty introduction of new real estate-related regulations or taxes in Ontario, in the absence of data and analysis to support these policy moves, could lead to a sharp price correction, impacting not only household wealth, but damaging the broader Canadian economy as well,” said Soper.