Fortress Real Developments, a Canadian real estate developer, blames low interest rates and lack of supply for high home prices across Canada.

But, in a new report, Fortress argues that developers aren’t hoarding land, a practice that would contribute to supply not meeting demand. The report notes most developers (80%) want to develop their land as soon as possible versus “choosing to be strategic about when they launch their sales programs per survey,” a choice that only 17% of developers are choosing.

Further, the report points out that “annual housing starts in Canada in 2016 were nearly identical to the 5- and 10-year averages, and […] slightly higher than the 50-year average of approximately 192,000 starts.” For 2017, the report adds, “the consensus forecast is calling for 184,000 housing starts.”

One driver of residential demand, says Fortress, is record immigration. Consider that “Ottawa recently confirmed that their immigration target for 2017 at 300,000,” says the report. Also, “Immigration has trended upward since the late 1990s when annual immigration dropped to approximately 175,000.”

Another is the number of Canadians who are reaching their prime homebuying years. That number will grow in the next ten years but at a slower pace than in the past, the report adds, citing Scotiabank senior economist Adrienne Warren.

Fortress concedes that determining why home prices are rising is a tough job, but examining how to cool markets is key given Canada’s “residential house prices are accelerating” at a faster pace than anywhere else in the world.

Already, even top earners across the country are struggling to afford homes, says Douglas Porter, chief economist at BMO Capital Markets. He recently illustrated the absurd situation faced by Toronto homebuyers via a case study example.

Read: Toronto homes prove too pricey for top 1%

To be clear, the Fortress report says the probability of a housing crash is low, noting, “Housing market disasters among OECD countries occur with a probability of 3% every year per the Bank of Canada’s economic analysis department.”

Still, one major risk is “most people don’t have the foggiest idea what a housing bubble is, how you would identify it, and why it is something a country or metro area should avoid.”

Fortress is far from the only player digging into the housing crisis.

Economists from most of Canada’s big banks have recently commented on current conditions and how to address them. TD senior economist James Marple says the further home prices and sales “appear to move away from fundamentals, the more pronounced the risk of a correction,” so now’s the time to pinpoint the cause.

A Scotiabank report takes on the challenge, listing several policy and tax solutions. Those include a tax on sellers who flip a property within a certain time frame.

Read: Taxes could cool the GTA housing market

Benjamin Tal, deputy chief economist of CIBC World Markets, points to more rental activity as a possible solution. Overall, he says it’s crucial that hot housing be dealt with before interest rate hikes test the market.

On March 28, members of Mortgage Professionals Canada met with dozens of members of Provincial Parliament and senior government officials. They discussed housing affordability, availability and accessibility, and potential policy solutions to the growing imbalance within the Greater Toronto Area market.

In a release, Mortgage Professionals Canada says, “Imposing a foreign buyers’ tax does nothing to solve a lack of supply and could create adverse effects on the national, provincial and regional economies.” Instead, it says the government of Ontario has to work with municipalities to remove barriers to development and encourage supply, as well as help with affordability.

The organization says “increased investments in critical infrastructure and increased incentives for single family home construction would help alleviate some of the affordability challenges.”


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