Raising rates will lower prices to some extent. So it should help somewhat. The issue is that’s it’s a very very blunt instrument. It just happens to be one of the only tools the BoC has to use. Ideally the feds would have stepped in at some poi t in the last 15 years to stop this madness…
Every level of government effectively ignored housing since the 90s. Unfortunately, we haven’t really seen the effect of that policy decision until now, so it’s really hard to go back in time and vote them out of office.
But I’d like to.
If only we had a government that could stop the rich and corporations from buying houses posted at under 1M (and index it to minimum wage or something)
The way to do that is to tax them.
Price controls don’t work–there’s a long and ugly list of examples of why–but increasing marginal taxation certain does work. We just stopped doing it because…mumble…mumble…supply-side…mumble…trickle-down…mumble…job creators…mumble.
You simply tax the things that harm society until those things go away.
Corporations owning residential homes should get taxed an extra 1% on the total value of the home every year, increasing at 2x the rate of inflation every January 1st. Do that for 5 years, then apply the tax to individuals who own more than one home, same deal - 1% + 2x the rate of inflation.
Combined with actual rent controls, this solves the problem, and it won’t shock the system and cause a housing crash, because various homes are at different stages of profitability.
I’m just some idiot on the internet. Why can’t some idiot in government come up with a similar plan?
The history of price controls suggests this will not give the outcome one would expect
Making your mortgage more expensive to “lower inflation”
I mean yeah. Once other “financial assets” become more attractive (bonds at 5.5%?) maybe less parasitical activity will happen in the housing market. The whole thing started going off the rails when rates dropped to essentially nothing.
If you think current home owners have it bad, imagine anyone trying to get in the market now. Not only are mortgages 3X the price, but the houses are 2X the price they were before. The entire thing is completely unsustainable, and yet the Feds have done fuck all. Well no, actually they have made it worse every single step of the way (see the first time home buyers savings account for the latest idiotic idea).
I am imagining anyone trying to get in the market. They are in a similar position as those who need to renew. Raising rates will not help either of them. I know that the low rates created a problem but raising them isn’t going to solve it because the problem is that we do not tax the rich adequately, which contributes to inflation. We give them tools to avoid taxes. The more they spend on things like housing, the less tax they pay.
We need to fix that or else nothing will improve for regular people if we just leave it to the BoC to fix it, which is how this problem was created in the first place with the low rates. We left the BoC to lower rates during economic slowdowns, instead of taxing the rich
They should increase property taxes back to where they were 20 years ago.
If you somehow have money saved for property, keep digging in until 2025 or 2026, then there will be a reckoning as a wave of unaffordable mortgages sweeps the landscape and people start dumping houses.
More like a wave of government bailouts to keep the party going.
Yeah or investors ready with investment $$$ to suck up all the foreclosed houses and rent them back.
