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Should policymakers have stepped in to try and tame southern Ontario’s unruly housing market as they did with the recently announced Fair Housing Plan? After all, the government doesn’t intervene like that with gold prices or large-cap stock performances, one commentator notes.

“Imagine if the premier had said: ‘When young people can’t imagine buying gold, we know we have a problem,” quips Peter Armstrong, a CBC host, riffing off Ontario Premier Kathleen Wynne’s comments about real estate.

Well, National Bank, the country’s sixth largest bank, is making the case for the Ontario government’s recent actions, which include sweeping rent control expansion, a tax on foreign speculation in the Greater Golden Horseshoe and laying the groundwork for a vacant-home tax in Toronto proper.

“Let’s be clear, standing by while housing prices shot to the moon in more than 70 [per cent] of its main urban centres was no longer a viable option for Ontario — the risks were simply too great,” write National Bank’s Warren Lovely and Stefane Marion, in a note.

To bolster their view, Lovely, National Bank’s public sector researcher, and Marion, the bank’s chief economist, chart the share of Ontario housing markets seeing home prices rise by at least 10 per cent annually.


Chart: National Bank

National Bank analyzes home prices in 15 regional Ontario markets (Guelph, London, Hamilton, Kingston, Kitchener, Oshawa, Windsor, Toronto, Thunder Bay, Sudbury, St. Catharines, Peterborough, Barrie, Brantford and Ottawa) and annual prices surged in the double digits in all but four last month.

Only Thunder Bay, Sudbury, Kingston and Ottawa recorded annual price increases of less than 10 per cent, according to the Teranet-National Bank House Price Index for March.

Even the index price in Windsor, a good four hours by car from Toronto, was up 13.3 per cent in March compared to the same month last year.

Too far away from Toronto’s labour market for a daily commute, could price exuberance in a place like Windsor be explained by retirees cashing out of Toronto real estate, buying cheap property elsewhere and pocketing the difference?

Marion hasn’t seen numbers to suggest retirees are leaving Toronto for faraway Ontario cities, although there has been some speculation this is a trend.

“If that was widespread you would see more supply on the market in the GTA, right? And we haven’t seen a big surge in supply, if anything the supply has been coming down, the homes available for resale — those have just been coming down,” he tells BuzzBuzzNews.

“I cannot explain why [home prices have] suddenly surged so much beyond the GTA,” he adds.

With home prices in several regional Ontario markets so detached from fundamentals that even a leading economist is baffled, National Bank prefers the province’s course of action to the alternative, also described in the note.

“You could do nothing, let a housing bubble inflate away, reap the economic and fiscal gains from a wholly unsustainable pattern of growth while you can, and then pick up the pieces of a broken economy when the bubble inevitably bursts,” Lovely and Marion comment.

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