Housing Bubble in Ontario -2017 May 02

The following was sent to Hon. Premier Kathleen Wynne on 2nd may 2017 by e-mail using his office Portal (on line) .

————

2017 May 02

Hon. Kathleen Wynne

The   Premier of Ontario

 

Housing Bubble in Ontario

 

Dear Madam

 

Please find below my thoughts as to the way the existing housing bubble in Ontario can be cooled   to a rational level.

 

———————-

Introduction  

There is a huge Housing bubble in Ontario

Prices are increasing in high percentage figures year over year.

Issue

The normal buyers – Ontario citizens   especially in GTA   and surrounding area – are left with so much obstacles to even make the first move to buy a residential property.   The young citizens who want to buy their first home are left with whopping debt – that even after intense haggling to make an acceptable offer to purchase a home.

Problem

There are multiple types of Speculators (middleman / interlocutors) – who push up the frenzy.

  • There is evidence of   “ paper flipping ” and other  speculations
  • There is “ property scalping ” in Ontario, which is described as “ those who go into new developments, buy up a slew of properties, and then flip them, while avoiding paying their fair share of taxes.”
  • There is “shadow flipping,” which involved purchase contracts being used for real-estate speculation existing homes
  • Non-resident Foreigners (with lot of cash in hand ) – buying residential properties for their own perceived security – in case they were to leave their home country for whatever reason
  • High demand driven by a strong economy and an influx of new residents from other parts of Canada.

All that results in unscrupulous Real Estate Agents   who encourage /allow bidding wars which leave buyers frustrated.

Government Solution

Premier Kathleen Wynne Government has come up with 16 point plan .

  • Refer to Globe and Mail Article in 22 April 2017 issue   – LINK:   http://www.theglobeandmail.com/real-estate/toronto/ontario-housing-16-big-changes-explained-in-charts/article34757648/
  • Apart from introducing the 15  per cent  “non-resident speculation tax”   which the Ontario government announced recently – there is nothing to curtail other speculators.

The 16 point plan is a feeble attempt to help the prospective renters – which will not cool the market.

My recommendations

In order to deal with this overheated market in the most rational way, and also to protect the value in people”™s homes,   it is necessary that all middlemen/ interlocutors are eliminated   – while also working to increase the supply of new residential units.

  • I think the Government should take measures to   stop the practice of   “ property scalping ”.   And also to stop the practice of ” paper flipping ”

All Real Estate developers must be made responsible to have each property registered individually (and thus pay necessary transfer and land tax) when it is proposed to be bought   by a so-called ” property scalper ” – rather than have the property transferred to a secondary buyer.   If a so called   ” property scalper ”   do not want to register the property in his own name – then the property shall not be sold/transferred to him/her or others (recommended by him/her) at that point.

Whoever (the prospective buyer) has signed the formal   ” offer forms ”   and which is accepted by the seller – shall be the one to whom the property be transferred.   The Real Estate Agent be made responsible to see that no secondary person is considered the buyer.

  • Same   procedure for   the   “shadow flipping” of a property .   No   ” shadow flipping ” of a property be allowed.

 

 

 

  • A drastic measure is also needed – when a property sees a “bidding war”   – the seller may   get the new enhanced price compared to what was listed as the price by the Real Estate Brokerage.

However, the Real Estate Brokerage needs to be penalized by the value of the sum by which the bidding went up compared to the listed price.   This then will stabilized the process of buying a residential property.

I believe that the unnecessary high demand of the residential properties can be curtailed by instituting the above measures.

There is another method by which the whole real estate market can be brought to some   rational functioning – that is to increase the borrowing cost by the buyer. Currently the business/ economic interest rates are really low and thus the value of a real estate property is influenced to be high – as the   yearly payment seems affordable by an ordinary buyer.

It may be necessary   for the Ontario Government to   impose a ” purchase tax ” of say 1% (can be more or less) of the purchase price (at the conclusion of the purchase process) – which would then also give revenue to the Government and stop possibly people to go crazy bidding prices up in trying to buy a residential property.   It will help to   cool the market down –   people would need to rationalize the need to buy a residential property on a   frenzy.

Note: No ” purchase tax ‘ be applicable to the first time buyer of a residential property.

I am sure the Ontario Government will review the above recommendations and have these rationalized   by its economic experts   and bureaucrats.   Hopefully these recommendations make sense.

PS –   Of course   –   the 15  per cent  “non-resident speculation tax”   shall be instituted .

regards

Pravin Shah

65 Rutherford Av.

Deep River

K0J 1P0 ,     Ontario

——————-

The following quick response was received   (Premier’s website) :

Thanks for your email. I value your input and appreciate your taking the time to get in touch with me.

Every email and letter I receive is carefully read and reviewed. Given the volume of emails and letters I receive, and because I may need to share your message with one of my Cabinet ministers or the appropriate government officials for more information, a response may take several business days.

Thanks again for contacting me.

Kathleen Wynne
Premier

Please note that we are not able to receive replies at this email address, so please do not respond directly to this email.