Recently in a church basement in downtown Toronto….
“Hello, my name is Ontario and I am a speculative bubble.”
“Welcome Ontario. My name is Kathleen. I take it that this is your first time to one of our meetings? We are heartened that you have recognized that you have a problem and that you would like to do something about it. That truly is the biggest step. Please relax. I know this is suppose to be anonymous but you may recognize some familiar faces in the group from Australia, Asia and some cities in Europe.”
“Most of the people here are already familiar with many aspects of our 16 step program but let me just run over the basics for you. The good news is that our program is painless. The biggest step is the imposition of a property transfer tax of 15% on non-citizens and on those who are not permanent residents of Canada. Vancouver, sitting in the back over there, went through the same thing and there was just some temporary mild discomfort. For you, Ontario, they tell us that this will have even a smaller impact on you as about only 8% of buyers fall into this category.”
“For pain management, we are imposing the tax only around the Golden Horseshoe. Maybe this will push some of the speculative buying up to The Nation’s Capital. If federal policy makers start seeing their home prices go up, maybe they won’t be so grumpy and envious…I’m just kidding.”
“The other big part of our program is that we will be implementing rent controls, keeping them at the rate of inflation with a cap at 2.5%. Again, this should be relatively painless for you. We were just trying to stop some people from using your state to take advantage of others.”
“One last big thing. We want to put in place a vacancy tax once we figure out what that means. Any questions?”
“You are not going to do anything about domestically-driven speculative activity?”
“Nope. Those buyers will probably back off for a few weeks until they get a feel for how important the foreign buyer was to the price increases, but I’m sure fundamentals will reassert themselves in no time.”
“You are not going to do anything about new housing supply?”
“Well, we are doing something. The Government had some acreage that they weren’t using so we will construct some low income housing. It’s not that those people were driving the speculative frenzy, but it does look good.”
“What about the greenbelt around Toronto? People tell me if restrictions were changed that could deliver significant amounts of new housing.”
“Our program is designed to be painless for both our voters and the environment. If we released too much supply, prices could come down too quickly. We don’t want to hurt the boomers by risking their hard-earned housing lotto winnings.”
“And nothing is going to be done about interest rates? I don’t have to suffer withdrawal from mortgage rates moving higher?”
“Well now that you have joined our program, that is all the Bank of Canada wanted to see. They can wipe their hands clean now. Now that you are a card-carrying member of regions carrying out macro-prudential measures against speculative activity, or MPMASA, they could even lower rates if they felt they had to once Mr. Trump milks NAFTA of its anti-American biases. Doctor Poloz up in Ottawa has done some fascinating work recently on the subject, claiming that interest rates have no impact whatsoever on what is happening to home prices in your region. It really is ground-breaking stuff.”
“Okay, so let me get this straight. This program will help address my speculative sickness by directly attacking 8% of the problem and by indirectly tinkering on the edges of some other things. I may have some very temporary side effects but they will probably subside in a month or so and now that I am carrying a membership card to MPMASA, this frees the central bank up to cut rates and give me a quick boost if they feel it is necessary because Poloz doesn’t think interest rates had anything to do with my predicament in the first place.”
“Yep.”
“I’m in.”
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