The failure

Days ago we dumped on the BC prem’s desperate election promise to tax unsold condos. It’s kneejerk, unschooled and achingly populist. People hate developers. So, whack ‘em. If it screws up the housing market more, that’s collateral damage for electoral success. Who cares?

Just the latest in an endless stream of political adventures in real estate. The goal is to make houses more affordable, and the result has been failure. The only things bringing prices down are higher interest rates and lower buyer confidence. The latter is a direct result of jobs and wages.

Unsold condos don’t make condos cost more. People with second homes or cottages don’t make housing overall more expensive. Empty-nest Boomers rattling around in in four-bedroom suburban properties don’t hike values. And people moving here, or investing here, have no direct effect on the worth of homes in a city.

The cost of money and sentiment. That’s it.

This brings us to that interesting UBS report mentioned a couple of days ago. Toronto and Vancouver topped the global hit parade for real estate strength for years, and are now racing to the bottom. Between 2014 and 2022 – when rates were low (Covid) and buyer confidence bubbly (FOMO) prices in these cities doubled.

Since then rates and inflation have swelled, a trade war and uncertainty have flatlined the economy, raised the jobless rate and sunk spirits. So prices have dipped between 20% and 30%. These cities, says UBS, are no longer in bubble territory as sales levels sink in Van to a two-decade low.

In fact, as we noted here, Toronto actually looks cheap compared to the world. Seriously. All that late-Millennial and GenZ moaning is not only irritating, but hollow. UBS says a skilled worker in DT Toronto now needs less than five years of income to buy a new condo in the city centre. In contrast, it would take 11 years in London. Fifteen in Hong Kong.

Source: UBS

Moreover, we have oodles of home loans available in Canada at 4.5% – not a bad deal with inflation at 3%. And that compares with 7% mortgages south of then border. UBS also underscores something this pathetic (but muscular) blog has pointed out for years: it’s way cheaper to rent than to own. And with Canadian housing markets losing altitude, there is no big capital fain to compensate for the burden of ownership.

Rent and invest. Don’t buy and struggle.

Will governments ever understand the best role for them is to get the hell out of the housing market and concentrate on big stuff? Like the economy? Could a career economist and former central banker smartypants like Mark Carney take us there?

Dunno. The current federal government is throwing a huge pile of money into encouraging new construction, financing developers, making land available, subsidizing construction and infrastructure and bribing cities to trash zoning.

But there is something they might – and probably will – do. Dump the foreign buyer ban.

This was nothing but political theatre on the part of the Trudeau Libs. After almost three years there is no data to prove preventing non-Canadians from buying houses here did anything to tame a market that was responding to interest rates and economic sentiment. It has, however, made it harder for Canadians to sell a home, say realtors.

The ban came into effect as 2023 dawned, was extended once and is now set to expire in three months. And expire it will. The law has prevented non-citizens and non permanent residents from buying a home in Canadian cities (rural areas and small settlements are not covered). There was never any evidence to justify it, just a sloppy perception by people that prices in general were forced higher because some Chinese dude bought a $8 million house in Point Grey or Rosedale.

Anyway, it failed. The Carney government will now replace it with a targeted plan like the one existing in Australia. Foreign money will be allowed to flow into newly built homes, new housing developments and vacant land that may become housing. The idea is to direct capital into increased supply of real estate, not into competition with folks in the resale market. So, some local Shopify multi-millionaire can buy that $8 million house and we’ll all feel better.

By the way, a study by the law firm Borden Ladner Gervais found that only 1% of real estate transactions in BC before the ban involved foreign buyers, and overall prices still rose after the ban. It was a nothingburger. Meanwhile industry economist Sherry Cooper says: “Look at the Americans that would be very interested in having a second property in Canada, particularly given how they feel about what’s going on in the US, Why shouldn’t those people be able to buy a property in Toronto that’s been listed on the market for 18 months?”

Anyway, it’s coming in Ottawa even if it’s dying a cruel death in BC. Common sense, that is.

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Source: https://www.greaterfool.ca/2026/09/30/the-failure-4/