Inviting intervention?

With the housing market on fire ― London home sales were up 57 per cent in March with an average price nearing $635,000 ― the debate over cooling measures ramps up

LONDON’S HOUSING MARKET logged another month of record sales and price gains in March.

The London and St. Thomas Association of Realtors (LSTAR) announced on Tuesday that 1,296 homes exchanged hands in its reporting region in March, an increase of more than 56% compared to the same time a year ago. The total sales are the highest recorded for the month of March since the Association began tracking data in 1978.

“We’ve experienced a very robust start to the first quarter of 2021, with the seventh consecutive month of record sales,” says LSTAR 2021 president, Jack Lane. “Three months into the year, there have been 2,671 sales, up more than 30 per cent over the same period last year.”

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The average home price in the LSTAR reporting region, which includes Middlesex and Elgin Counties, was $634,799, a 43.2 per cent jump from a year ago.

In London proper, a total of 897 homes were sold in March, a 57.4 per cent increase over March 2020, with an average price of $634,940.

According to Lane, low supply and high demand continue to affect the average sales price across the major areas of LSTAR’s jurisdiction.

“Another area we monitor is inventory, which shows how long it would take to liquidate existing inventories at the current rate of sales activity,” Lane says. “At the end of March, there were 0.4 months of inventory, lower than the 0.6 months of inventory reported at the end of February. Out of the five main areas, St. Thomas and Strathroy had the lowest housing supply, with only 0.3 months of inventory. Elgin had the highest supply with 0.7 months.”

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The data released by LSTAR is the latest reminder of the potent combination of low interest rates and the work-from-home trend, which have combined to propel demand for more space among home buyers ― particularly outside the country’s largest cities.

As that demand drives up prices, a flurry of prominent voices have spoken out on the stakes for Canada’s economy. Rosenberg Research & Associates Inc. president, David Rosenberg, who predicted the collapse in U.S. housing that triggered the 2008-09 financial crisis, earlier this month described Canadian housing as “one of the biggest bubbles of all time.”

More recently, RBC senior economist Robert Hogue said policymakers should be putting “everything on the table, including sacred cows like the principal residence exemption from capital gains tax.”

However, Scotiabank senior economist, Jean-Francois Perrault, made it clear he and his team don’t share that view, telling clients in a report that lifting the exemption “should not be considered.”

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That argument is in line with the outlook from a number of industry players, including Re/Max Canada. A joint statement from Christopher Alexander, chief strategy officer and executive vice president at Re/Max of Ontario-Atlantic Canada, and Elton Ash, regional executive vice president at RE/Max of Western Canada, called for governments to be cautious with cooling measures such as policies and taxes that have served as short-term fixes in the past, but have not provided a long-term solution to Canada’s housing affordability crisis.

“Long-term industry-wide changes to improving housing affordability and making the market more transparent, such as increasing our national housing supply, making all purchases conditional on financing to reduce financial overextension of buyers, and regulations concerning listing price thresholds, might be the answer to cooling the exuberance enveloping Canada’s housing market,” they said in the statement. “Defaulting to conventional changes in tax and/or mortgage policies, as has been deployed unsuccessfully in the recent past, are not recipes for success, as they do not address the root causes.” Inviting intervention? housing market Real Estate

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