Houses as Homes - or a Store of Capital?

I’m grateful to The Globe and Mail’s Rob Carrick for highlighting my recent report, The Great Sell Off: How Our Homes Became Someone Else’s Business, calling it “fresh thinking.”

The report explores a troubling trend: in Canada, buying houses and condos as investment properties has become one of the fastest and most reliable ways to build wealth. This shift has made homes more expensive, pushed a generation out of homeownership, and funnelled capital away from productive sectors into real estate speculation.

We often hear that investor demand isn’t a concern anymore - that it’s dried up. But that argument isn’t new.

In 2013, Nobel Laureate Robert Shiller made a similar claim. He dismissed the 2006 investor-driven housing bubble in the U.S. as a one-off “fad,” suggesting it wouldn’t return because housing traditionally wasn’t a great investment. 

At that very moment, Wall Street was raising billions to buy up hundreds of thousands of homes.

Today, we hear a new version of the same argument: housing is a good investment because it’s scarce - and that scarcity, we’re told, is almost entirely the result of restrictive zoning. Remove the barriers to building, and housing will become so abundant that it will no longer be a lucrative investment.

But I see that as an economic utopia - an elegant theory that doesn’t hold up in the real world.

Governments are now betting everything on this theory: that we can solve the housing crisis by simply building more homes. But they continue to ignore another fundamental supply issue - the supply of capital flooding into housing.

Homes have become a modern store of wealth for the affluent. And as long as our policies continue to encourage people to park capital in houses instead of investing in businesses or innovation, we’ll never get to a place where housing is truly affordable.

John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).

Have questions about your own moves in the Toronto area as a buyer, seller, investor or renter? Book a no-obligation consult with John and his team at a Realosophy here: https://www.movesmartly.com/meetjohn

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