Perspectives: It’s Time To Demand Change
Government intervention has spooked the market and made housing unaffordable for most
There is no denying that the climate of home sales has changed from just over a year ago. Nearly every media outlet jumps at the opportunity to sensationalize the year-over-year comparison statistics. To their credit, those statistics do depict a drastic change in the numbers. Unfortunately, the year-over-year comparison seems to be all that they are focused on. In what has become a vicious news cycle, this narrow scope unjustly pushes the market further down the road from reaching its equilibrium and for that reason I will attempt to speed up the process.
What we know is that the first quarter of 2017 was without doubt the hottest the market Southern Ontario has recorded, which was not healthy or normal but it was a natural result (more on that later). This all came to an abrupt halt with the introduction of the province’s 16-point Fair Housing Plan, also know as government intervention. The plan has successfully spooked the market, but has done little in accomplishing the “fairness” it set out to do. Couple this with the increased mortgage regulations stress test, and what we witness in the year-over-year data is easily explained.
Furthermore, the severity of this data has been exacerbated because it happened at a time when many baby boomers were putting their next step into motion. First-time buyers who were poised to benefit from this rare moment in time cannot capitalize because the net affect of the stress test results in the equivalent of having no price adjustments at all.
Those who made future plans under fair market conditions are now faced with the fallout of the unfair consequences, which stem from a sudden market intervention. Ironically, one that was devised to compensate for the issue that drove prices up in the first place — lack of supply.
The simplest and very first lesson in economics is that of supply and demand. If there is an imbalance in either, price adjustments will occur until equilibrium is naturally met.
An appropriate approach to creating fair housing should have started years ago. Once population growth targets were set and being realized, an adjustment to the policy and the approval process allowing for housing to come to market quicker should have been made. As it currently stands it takes a developer south of the border mere months from purchasing land to selling and building homes, meanwhile in Ontario this same process will take several years at minimum. Our population has been growing according to plan while our housing supply has been shrinking.
So what does this all mean? It means that despite a challenging moment for understanding the home market, in the long term demand will still outpace our lack of supply.
Leave the year-over-year statistics behind and focus on the future. In the immediate term there is a slight edge to buyers in certain places who are ready and able to qualify — but don’t hesitate as prices will soon resume their rise. If the entire market wants to avoid future turbulence we all need to voice our desire for a change of Wynn’d.
Fraser Wilson is the vice president of International Home Marketing Group (IHMG), a fully integrated sales management and marketing company. IHMG.ca