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Don Martin: Ontario takes politically smart, economically necessary action on housing
A sign advertises a new home for sale in Carleton Place, Ont., on March 17, 2015. (Sean Kilpatrick/The Canadian Press)
You have to experience a bust to fear the bubble.
That’s why Ontario is taking politically smart and economically necessary steps to open a small leak in what many experts call a hyper-inflated housing bubble in the Toronto area.
You only have to spend an Easter weekend with Toronto relatives to observe all the symptoms of what was going on in Alberta in the mid-1980s, when price escalations were considered normal and buying immediately was essential, even if it meant an unaffordable mortgage payment.
I was living in Calgary when it went . . . pop.
My modest townhouse had soared to an unimaginable value on what was then the outskirts of Calgary before it plunged to half its peak value in a year.
It was a devastating reality check.
Granted, Toronto’s economy doesn’t sway to the whimsical beat of world oil prices.
But there’s a rampant jump-on-the-buying-bandwagon psychology behind this artificial bidding frenzy. And that same herd mentality could deliver a hard whack on prices if a soft landing is not gently injected into the market.
While today’s anti-speculation tax on foreigners and tight rent controls are more about life-jacketing the sinking Ontario Liberals and less about giving young voters the faint hope of saving for a home, it might actually be the best thing for existing homeowners.
The last thing they want to experience is an interest rate hike or an economic slowdown delivering full reverse thrust to a market flying on unsustainable expectations.
Panic sets in as overextended owners jettison unaffordable homes, speculation stops, foreclosures jump, listings surge as buyers hold off for better prices and the downward ripple radiates out throughout the Golden Horseshoe.
So if today’s moves stop a price spiral which has my Toronto friends joking about buying a small village in New Brunswick for the sale price of their one detached home, don’t fret.
That million-dollar house you bought ten years ago for $300,000 has delivered an amazing tax-free return on investment. Holding out for another $200,000 is just plain greedy.
At the end of the day, people with Toronto jobs have to live somewhere. And, trust me on this, it’s better to reside in a housing price balloon with a small leak than a bubble when it bursts.
And that’s the Last Word.