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Briefing highlights

  • More tulips not the answer to housing bubble
  • Ontario rent controls wrong: Economist
  • Canada sinks to a trade deficit

Tulips and houses

The great supply-demand debate rages on.

And just as planting more Dutch tulips wasn’t the answer in 1637, building more homes across Toronto isn’t the immediate answer now, says Bank of Montreal.

You’ve got to ease demand first because we don’t want to get “anywhere close” to Holland in the 1600s, South Sea a century later, dot-com stocks in 1999, or American real estate in 2006, warns BMO chief economist Douglas Porter.

Policy makers have indeed attacked demand with tax and mortgage measures, and Ontario Finance Minister Charles Sousa says he will take action in his next budget. Toronto Mayor John Tory, too, says he’s open to the idea of taxing speculators sitting in vacant homes.

But some – the real estate industry, for example – say the answer lies in more home building and that Ontario should open up land to push that along.

But, Mr. Porter said, “with prices screaming higher by 20 per cent to 30 per cent per year, any moderate increase in housing supply will be swallowed whole in the great maw of raging demand.”

Obviously supply is an issue amid a listings drought, he added, but the fastest way to cool the market is to cool buyer fever.

“Do you think that the best response to the Dutch Tulip Bubble in 1637 was to cultivate more land and grow more tulips?” Mr. Porter said in a recent research note.

“Do you think the best response to the Dot-com Bubble of 1999 was an increased supply of shares of Pets.com or Toys.com?” he added.

“Do you think the best remedy to the U.S. housing bubble in 2006 was to build yet more homes in Vegas, Phoenix and Florida?”

Toronto is nowhere near the fevered pitch of those examples, Mr. Porter said, but immediate action is needed lest the bubble get too big.

“And, any adjustments on the supply side will take years to affect real change in the market, and we are dealing with an inferno here and now.”

Ontario rent controls wrong: Economist

New rent-control rules are “the exact opposite” of what is needed to deal with housing affordability problems in Toronto, Canadian Imperial Bank of Commerce economist Benjamin Tal says.

In a new report, Mr. Tal urges the Ontario government not to proceed with “alarming” plans to expand rent-control protections, saying the Greater Toronto Area needs a significant increase in rental units to help deal with the city’s housing crisis, especially among young families, The Globe and Mail’s Janet McFarland reports.

Canadian trade disappoints

Canada has swung from a trade surplus to a notable deficit, spoiling Mr. Poloz’s hopes for a sustained turnaround.

After three months on the plus side, the country fell into a deficit of $972-million in February, Statistics Canada’s latest reading shows.

Exports slipped 2.4 per cent, while imports gained 0.6 per cent.

The tumble in exports was widespread, showing up in eight of 11 industries measured, the agency said.

Exports to the United States slipped 1.2 per cent but imports from the south fell by a larger 1.6 per cent, widening Canada’s surplus with the U.S. to $4.5-billion.

Exports to other countries sank 5.9 per cent, and imports rose 4.9 per cent.

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