![\"\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2021\/11\/blind-bidding-canada.jpg\")
<\/a>Photo:\u00a0Spiroview Inc.<\/a> \/ Adobe Stock<\/em><\/p>\nPlans to put a stop to blind bidding in Canada could have the opposite intended effect by driving up real estate prices in hot markets, a new report suggests.<\/p>\n
The Smart Prosperity Institute recently released new findings<\/a> that challenge whether a ban to blind bidding on homes would slow the growth of prices.<\/p>\n The report, which was funded by the Canadian Real Estate Association (CREA), concluded that blind bidding \u201cdoes not ultimately drive up home prices, and requiring open bidding in a hot real-estate may lead to higher, rather than lower, home prices.\u201d<\/p>\n An end to blind bidding was one of the components of the Liberal Party\u2019s Home Buyers\u2019 Bill of Rights that was proposed during the September federal election. Without knowing what other buyers are bidding on a property, this practice \u201cultimately drives up home prices,\u201d the campaign stated<\/a>.<\/p>\n\n However, the CREA-funded research pointed out that the policy was unlikely to reverse rising prices based on empirical evidence and economic theory cited in the report.<\/p>\n \u201cCanadians need climate-friendly, family-friendly housing that they can afford in the communities in which they work. While federal policies are vital to meet this goal, banning blind bidding is unlikely to have much of a positive effect,\u201d said Dr. Mike Moffatt, the author of the report, in a press release<\/a>.<\/p>\n The Smart Prosperity Institute\u2019s report explained that Sweden, which requires real estate bids to be open, has \u201cexperienced some of the fastest-growing real-estate prices in the last 20 years.\u201d A similar situation has also been observed in New Zealand and Australia, where open bidding via auction is common practice while prices in these countries have \u201crisen dramatically.\u201d<\/p>\n Studies on residential real-estate sales in Ireland, along with land sales in the United States and Singapore, also associated increased bid transparency with increased average sales prices, especially in overheated markets.<\/p>\n \u201cThis could be due to several factors, including public bids creating a signal that a property is particularly valuable, in a way that less transparent bids do not,\u201d said the report.<\/p>\n In a blind bidding scenario, the report explained that since buyers are unable to see the offers being made by other bidders, they may submit high bids, \u201cjust to be safe.\u201d The lack of transparency would therefore be argued as a cause for buyers to panic and overbid. On the contrary, the report suggested that open bidding can also create \u201cfrenzied market psychology,\u201d which causes final bids in open auctions to be even higher compared to closed bidding.<\/p>\n \u201cThat is, instead of taming out of control market psychology, transparency adds fuel to it,\u201d the report stated.<\/p>\n The think tank\u2019s report also pointed out that there would be \u201cnon-price consequences,\u201d to putting an end to blind bidding, such as \u201ctrading-off of privacy for transparency.\u201d If the federal government were to move forward with an blind bidding ban, they would need to consider which details would remain private and which would be available to other bidders, the report explained.<\/p>\n \u201cREALTORS\u00ae have been telling us for years that \u2018how\u2019 offers are made is not the primary factor driving Canadian home prices higher, it is simply there\u2019s more demand than available properties,\u201d said CREA CEO Michael Bourque in a press release.<\/p>\n \u201cThis report demonstrates clearly that in countries where bidding is completely transparent (e.g. open auctions), price increases are greater than those recorded in Canada. The solution is to build more homes that buyers want, as soon as possible,\u201d he added.<\/p>\n Plans to put a stop to blind bidding in Canada could have the opposite intended effect by driving up real estate prices in hot markets, a new report suggests. <\/p>\n","protected":false},"author":49,"featured_media":220880,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","apple_news_api_created_at":"2021-11-03T16:29:33Z","apple_news_api_id":"5d8bcbcd-877c-488e-a36f-f185600a8a25","apple_news_api_modified_at":"2021-11-03T16:33:46Z","apple_news_api_revision":"AAAAAAAAAAAAAAAAAAAAAA==","apple_news_api_share_url":"https:\/\/apple.news\/AXYvLzYd8SI6jb_GFYAqKJQ","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"middle","apple_news_slug":"","apple_news_sections":["https:\/\/u48r14.digitalhub.com\/sections\/09b86915-7d2b-3acd-915b-b215002d01b7"],"apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":""},"categories":[11269],"tags":[],"coauthors":[10332],"apple_news_notices":[],"yoast_head":"\n<\/a>Photo: James Bombales<\/a><\/em><\/p>\n