Over the past couple of years we’ve heard Mark Carney and Jim Flaherty escalate their concerns about condo markets in Toronto and Vancouver but we have yet to see the federal government introduce any concrete policies to try to cool things down.
One of the key problems with Toronto’s pre-construction condo market is that it is almost entirely fueled by speculators. Speculators are buying condominiums in the very early stages of a project with the expectation that prices will go up significantly once the building is completed.
This is a problem because for most consumers, real estate makes up a huge part of our individual financial portfolios as we seek out the financial discipline and sense of personal security that home ownership offers. Speculators, on the other hand, pursue the same assets for very different motives - high risk, short-term profits. (When referring to speculators, we do not mean investors who purchase to rent out condos as they are holding these assets for the long-term.) These are conflicting motives that threaten the health of the asset class for everyone.
This is why (John's note: and believe me I am very surprised by this myself) we are about to argue for more taxes. Many taxes are ill-thought out, poorly conceived and executed instruments that do not deliver their theoretical benefits, but that does not negate the good that these policy instruments can do with the right goal in mind - in this case, to protect an entire asset class for the benefit of all.
It’s time for Flaherty to cool Toronto’s pre-construction condo market by introducing policies that curb speculation.