Slipping into fantasy

April is prime rutting season when hormones flow and the nesting is serious.

But 2025 ain’t normal. So many reasons for that, of course, from mortgage rates to Trump and tariffs, to election uncertainty, a looming recession, employment and lenders more seized with risk. There’s no spring housing market this year. Early next week we’ll have more data to support this, but stats from two major markets tell the tale today.

Let’s look there, then bounce to a rockstar realtor’s suggestions on how we do a change-up.

In bucolic Victoria, where real estate costs way more than it should, sales last month fell 5.3%. Condos were down 10%. “Activity in April was most likely impacted by events in play well beyond our immediate real estate market,” says grand wizard Dirk VanderWal. “Political uncertainty associated with the federal election, combined with broader economic concerns stemming from the United States tempered our brisk spring market growth.”

So sales (demand) down. Listings (supply) up by 13%. But what happened to prices? The benchmark is $1,344,800 – an increase of 3.3%. In the world of economics, how does this make sense?

Let’s flip to Calgary which, along with Montreal, is one of the most affordable cities in the country. Here the monthly inventory doubled that of last year – oodles of supply. Sales, however, crashed 22% below year-ago levels. “Economic uncertainty has weighed on home sales in our market,” says cartel economist Ann-Marie Lurie.

So do sharply lower sales and swelling supply mean homes cost less? Not a chance. “Benchmark prices for each property type have remained relatively stable compared to last month. However, compared to last year, detached and semi-detached prices are over two per cent higher than last year’s levels, while apartment and row-style home prices have remained relatively unchanged,” say the realtors.

When other cities report, expect more of the same. Buyers have retreated. A massive surplus of available listings grows daily. There is serious distress in slivers of the market (as detailed here yesterday with condo assignment sales). But overall, prices have stalled out despite months and months and months of tepid demand, growing anxiety and Trumpian economic malaise.

Is this the new normal? Will homeowners sit on their hands forever, refuse to drop their ask, and wait for the next inevitable boom? Will investors take advantage of a softer market to gobble up more properties, also expecting higher rents and rising valuations once the orange threat ends? Have we reached a point where it’s routine and permanent that a house costs ten or twelve times a family’s annual income? That’s what the latest RBC affordability index suggests, and which sales stats confirm.

So what can we do?

As detailed here earlier this week, governments – like the shiny, new Carney one – keep harping on a supply shortage and vow to throw up more units. But supply is not the issue. It’s price. We have financialized residential real estate, turning it into an asset like stocks, bonds, ETFs and futures contracts. Investors own half the condos in Toronto, for example. Most Boomers hold the bulk of their net worth in a single property. The kiddos have learned the only can’t-fail path to financial security in this country lies through property ownership. The tax system made it so. Culture cemented it. The laws of supply and demand has been slaughtered. And now we have a generational war as the result.

“Every election, we hear the same promises: more housing, more affordability. But for the next generation, homeownership is slipping further into fantasy,” says Toronto brokerage owner John Pasalis (who still hates me). “I’ve been in the real estate business for over twenty years, and in that time, I’ve seen young homebuyers lose hope—and parents wonder why their children can’t afford what once seemed attainable.

“Contrary to what many suggest, home prices in Canada didn’t explode because cities stopped building. In fact, many metropolitan areas have seen a steady pipeline of new housing. What’s changed is the role that housing plays in our financial system. We’ve moved from one economic reality to another—a full paradigm shift. In the old housing paradigm, home prices were anchored by incomes. Households saved for a down payment, qualified for a mortgage based on what they earned, and bought homes to live in. That world was governed by an internal logic: prices couldn’t rise far beyond what people could reasonably afford. But in the new paradigm, that anchor has been severed. Housing is no longer just about shelter—it’s a financial instrument. Prices are no longer constrained by income but driven by capital flows.”

Here are his solutions:

1. Raise minimum downpayments for investors from 20% to 35%. It will then be more difficult to qualify for a mortgage, reducing demand. “By reducing the amount of debt an investor can take on, this policy also reduces the rate of return investors can expect on their rental property investment.”
2. Heap on additional land transfer taxes for people buying any property other than a primary residence. “Charging an additional land transfer tax increases the amount of money investors need on closing, making it harder for them to buy and less profitable even if they do purchase the home.” But, he says, exempt cottages.
3. Drop taxes on newly-built homes (as the reds and blues suggested in the election) but only for first-time buyers, and not investors. “Public funds should not be subsidizing investor purchases. Instead, policy should focus on making it easier for first-time buyers to enter the market, and harder for investors to compete with them.”
4. Disallow the ability of investors to deduct mortgage interest costs from taxable income. “The policy will not end investors buying homes, but it makes owning a single-family home less lucrative. An investor who buys a home in cash would not be impacted by this policy, but buying a home in cash is a far less lucrative way to invest in single-family homes.”
5. Treat all profits from selling residential real estate as personal income in the hands of investors. “Today, capital gains from real estate are taxed at a lower rate than income. The solution is to remove this preferential tax treatment and tax any capital gains from single-family homes used as investment properties at the same rate as income.”

Is Pasalis correct? Or will scrubbing investors out of the market crash the number of units available for rent, and spike costs for tenants? Are investors really to blame for today’s insane prices, or by clinging to the PR tax exemption, is the tax code itself responsible for the financialization of homes? And how will any of the above actually drop the price of a resale house in Kits, Etobicoke or Point Pleasant? In most hoods, investors are rare. Owners are covetous.

What would you do, as prime minister?

About the picture: “Chico & Zoe, who made their Web debut individually on your blog, met up again near their home on Vancouver Island,” writes Lawrence. “They spent time discussing the election and were confident that Mark Carney would be able to come to a satisfactory deal with Mr. Trump (they are quite respectful even if not deserved)  and this would lead to more and better treats making their way into our country and hopefully into their mouths!”

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Source: https://www.greaterfool.ca/2025/05/02/slipping-into-fantasy/