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Author of the article:<\/p>\n
Bianca Bharti<\/span> <\/div><\/div>\n<\/picture>For the last six months, on average, new listings have been coming to market 10 to 15 per cent faster than pre-pandemic levels, according to the report by Bank of Montreal senior economist Robert Kavcic.<\/span> Photo by Ben Nelms\/Bloomberg files<\/span> <\/figcaption><\/figure>\n<\/div>\n\n
Article content<\/h2>\n In Canada\u2019s housing market, scant supply is often fingered as the culprit for soaring prices, but a research report from one of the country\u2019s big banks suggests new listings are strong, it\u2019s just that demand is far stronger.<\/p>\n
For the last six months, on average, new listings have been coming to market 10 to 15 per cent faster than pre-pandemic levels, according to the report by Bank of Montreal senior economist Robert Kavcic. At the same time, home purchases have gone up about 50 per cent, he said.<\/p>\n
\u201cIt\u2019s pretty clear there\u2019s not a supply problem here on the resale market,\u201d Kavcic told the Financial Post. \u201cWe are getting plenty of supply by historical standards, it\u2019s just getting completely vapourized by demand.\u201d<\/p>\n
The report, published Tuesday, adds fuel to a raging debate about whether the government should enact policy changes to cool a housing market that has seen prices jump 25 per cent from last year.<\/p>\n<\/p><\/div>\n
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Article content<\/h2>\n Kavcic is one of those who have come out to say policymakers need to act.<\/p>\n
In a report released last week, Kavcic suggested several options, including banning blind bidding, imposing a speculation tax and allowing a capital gains tax on non-primary residences. However, he told the Post the most effective fix would be the central bank raising interest rates.<\/p>\n
\nIt’s pretty clear there’s not a supply problem here on the resale market<\/p>\n
Robert Kavcic, Bank of Montreal senior economist<\/p>\n<\/blockquote>\n
It\u2019s a tricky solution, he acknowledged, as the Bank of Canada sets interest rates to target the economy as a whole, not just one sector, such as housing.<\/p>\n
But given the unprecedented level of financial stimulus being provided by government, there might be room to make an exception.<\/p>\n
\u201cYou can argue that because fiscal policy has stepped in so aggressively, maybe monetary policy can back off a little bit,\u201d Kavcic said. He added that because the central bank has signalled it could be a couple years before rates rise again, people will expect housing prices to continue climbing.<\/p>\n
\u201cThe prices are the market\u2019s way of telling us that interest rates are too low,\u201d he said.<\/p>\n
Royal Bank of Canada senior economist Robert Hogue in a March report also called for intervention, arguing that housing policy should be reviewed in a more holistic way by either boosting supply, discouraging speculative activity or tightening mortgage-lending rules.<\/p>\n
\nThe prices are the market’s way of telling us that interest rates are too low<\/p>\n
Robert Kavcic<\/p>\n<\/blockquote>\n
Benjamin Tal, deputy chief economist at Canadian Imperial Bank of Commerce, meanwhile, recently argued that raising interest rates is not the way to go as it can affect other parts of the economy.<\/p>\n<\/p><\/div>\n
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Article content<\/h2>\n \u201cAs a society, we have never been so sensitive to the risk of higher interest rates,\u201d Tal told the Post last week. \u201cIf we raise interest rates right now, do you know where the dollar will go? To parity. That will kill our exports.\u201d<\/p>\n<\/p>\n\n Millennials are taking advantage of low-rate window to jump into housing market, poll suggests <\/span><\/h3>\n<\/li>\n BMO chief executive urges policymakers to watch, but wait, on housing intervention <\/span><\/h3>\n<\/li>\n Toronto home prices surge more than 20% as bubble debate heats up <\/span><\/h3>\n<\/li>\n Affluent millennials and wealthy families sitting on a pile of cash are the latest drivers of high-end Canadian real estate <\/span><\/h3>\n<\/li>\n<\/ol>\n<\/section>\nRather, because demand is so high, governments should make it easier to increase the overall supply of housing, but Tal stopped short of listing concrete proposals.<\/p>\n
The Bank of Nova Scotia also suggested this week that government should hold off on intervening to see how new spring listings could potentially close the supply and demand gap.<\/p>\n
John Webster, Scotiabank\u2019s head of real estate secured lending, echoed Tal\u2019s view that supply overall needs to be expanded to meet burgeoning demand.<\/p>\n
\u201cWe need to build more and the solution is to facilitate rule changes on how difficult it is to build new homes and condominiums,\u201d he said, adding that all levels of government need to work together.<\/p>\n
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