I hate to dwell on politics unless it directly affects my clients. In the case of Trudeau’s promises to help you buy a home, I will make an exception – again. Here’s a look at the Liberal’s aggressive real estate plan and how it might help or hinder your aspirations.
Government Intervention: Good or Bad?
Trudeau claims government intervention is needed to put an end to the “instability” and “uncertainty” of soaring housing prices in cities like Toronto. What we do know is that sales are sullied by bidding wars, and that foreign buyers have contributed to soaring prices. Foreign buyers have also left a large amount of unoccupied properties in a market where homes are in high demand. These are both bad things for buyers and in many cases, renters as well. However, the high prices and bidding wars are good for sellers. Regulatory measures introduced by the government are designed to help buyers, but must also protect the rights of sellers who deserve to get the best price for their properties.
Billions in Funding Targets Investors
The Liberals promised billions of dollars to help curb common investment strategies, including flipping homes. This practice is based on finding properties in need of TLC, placing a low-ball offer to take it off the seller’s hands, and then renovating it to make a profit. If the government did ban flipping, it could help buyers looking for fixer uppers for their own use find and purchase a home more affordably, while renovating it to meet their needs. It would also not interfere with a seller’s ability to get the best price for their home; so in this case, the plan is a win-win situation. However, if you aspire to become a property investor, it isn’t great news. Add to this the mention of possibly curtailing how long tracts of land can sit vacant, and it becomes a new challenge for real estate investors.
Supply and Demand
The whole discussion surrounding vacant land is based on supply and demand. The Liberals pledged to build, preserve, or repair 1.4 million homes in four years. The plan focuses on building what Trudeau called “middle-class homes.” To acquire the land required for new builds, the Liberals would look at speculators sitting on vacant land and watching values rise to increase their profits as much as possible. If this land were freed up, it would provide the space required to potentially build tens of thousands of new houses. The plan addresses issues with supply and protects buyers’ rights, but would again infringe on the profit potential for real estate investors. So while buyers win out with fewer supply constraints, sellers and investors both stand to lose.
Buyers’ Rights to Own a Home
The bottom line is that the government wants to reward hard working people who strive to save enough money to own a home. This is commendable. Because housing prices are so high, the dream of home ownership is out of reach for the average person both in the GTA, and in many parts of Ontario. The current market also continues to force buyers further and further from their jobs, whether people rent or own their homes. So if laws are in place to remove the bottomless pockets of speculators from bidding wars, while freeing up more land for new builds and also stopping the practice of house-flipping, buyers have a better chance of buying or renting an affordable home in the same communities where they work or go to school. As for investors and sellers, now is the time to keep an eye on the government’s plans. You need to make sure you know when government regulations could interfere with your ROI.
Whether you are shopping for a home in Toronto, selling or looking for an investment, I can provide a strategy that works for your needs. Let’s chat. To understand the blind bidding process more and how the new legislation might help check out this blog.
Photo by Benoit Debaix on Unsplash
