Finance Committee on Feb. 13th, 2017

[Evan Siddall]

Sorry, was there a question, sir?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

The question is, do you believe this policy was really a balanced one?

[Evan Siddall]

Yes, I do.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

After all the consequences around it...?

[Evan Siddall]

I'm even more convinced now than when we advised the minister without seeing the impact and only predicting it.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

Finally, would the new risk sharing rules make it more difficult for rural Canadians to access mortgages or not?

[Evan Siddall]

Which new rules?

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

The new risk sharing rules.

[Evan Siddall]

There are no rules that have been promulgated. One of the questions in the consultations is to understand the impact on rural Canadians so that the policy would account for that. So, no, I would not make that prediction.

[Ziad Aboultaif, Conservative, Edmonton Manning, AB]

It's not predictions—

[The Chair, Liberal, Wayne Easter]

Sorry, Ziad, we're a little over and we're tight on time.

Mr. Sorbara.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Good afternoon, gentlemen. Welcome.

I don't think there's anything more important for Canadians than their home. I was invited to attend a pre-budget consultation in the city of Toronto with the member from York Centre. I would say half the comments and questions we received from the residents were with regard to our housing market, in terms of affordability, accessibility, and ensuring that, for one voter, her kids would be able to buy a home and live in the neighbourhood they grew up in. It's very topical, as you can imagine. Two days ago, we had a house in Toronto listed for $1.5 million and sell for $2.6 million, I think it was, so it was a million dollars over. There's obviously something going on. Canadians are concerned and they want to know that things aren't going to go astray.

Mr. Siddall, you've commented quite prudently on our housing market for the last several months in terms of identifying the risks and vulnerabilities. I've read your speeches and gone over the results. It behooves us to make sure we deliver the message that CMHC, since 1954 or whatever the year was, is there to assist Canadians in entering the housing market. We must ensure they do so in a prudent manner. As the Bank of Canada comments, we must ensure that the quality of indebtedness that Canadians take on going forward is a good quality. We don't want individuals overstretching themselves, especially if there's an exogenous shocker or anything of that manner.

A number of countries have undertaken actions for their housing market, be it Australia, Switzerland, New Zealand, Hong Kong, or Britain. I would like you to answer, because I think what we've done is prudent. We needed to ensure financial stability. I believe we have a home ownership rate of 69%. However, Canada is made up of regional markets, not one national market.

When we're looking at the Canadian housing market, what other pieces of information do we need to improve our decision-making? If you look at Australia, they seem to have more data than we are able to have. What more can we get to allow you folks to do an even better job than you're doing?

[Evan Siddall]

Let me just take a step back and first of all refer to the affordability question. It is an important point that you make, namely that the more we support demand, the higher prices will be, all things being equal. If we make it easier for people to buy a home, that will increase demand, which will increase prices.

We have to think about these issues in affordability terms. In fact, as I've said in my speeches, which you and my mother are the only people to have read—thank you, sir—some more attention to the supply side of the equation is a pressing need. We need to orient ourselves as much toward supply as demand.

On the data point, we've been working very hard. We feel it's our responsibility as the servants with respect to housing in this country to get that for Canadians, in consultation with OSFI, Statistics Canada, and others. We've even talked to colleagues at the Department of Finance about different ways to get that information legislatively and we will be working on that over the next year or two.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

We had some data come out on the number of unoccupied homes across Canada, and it's over one million, if I'm not mistaken.

Let me just make sure.

It's actually 1.3 million empty or temporarily occupied homes. That's an issue. I hear from friends who live in condos in downtown Toronto that when Elections Canada comes to try to enumerate everybody, a lot of doors remain closed because the people aren't there. Foreign investment is an issue for many Canadians, which you hear about anecdotally a lot, be it in Vancouver or Toronto. I think that is something we need to focus on.

I want you to reiterate how important it is to the quality of indebtedness that we don't let it go too astray.

[Evan Siddall]

Yes, to quality and magnitude.

With respect to foreign investment, in fact the data we have suggests that less than 5% of homes in Canada are owned by non-Canadians. I'm not concerned about the status of it now. It's a factor, not the factor. However, the outlook for increased foreign investment and increased immigration is another source of potential demand that will push prices and affordability higher.

In particular, there is a lot of money that wants to leave China and can't. That's a country with a very high savings rate and a proclivity to invest in real estate, so I agree that those are factors we need to try to measure better.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Just quickly—

[The Chair, Liberal, Wayne Easter]

Sorry, Francesco, you're over time.

Mr. Boulerice.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

I'm pleased to be here today as part of the committee's work.

I'll go fairly quickly.

I'm the member for Rosemont—La Petite-Patrie, in Montreal. Most people in the constituency are tenants. People are concerned about many issues. These include property prices and home ownership, mainly for young families. Sometimes, these families are forced to choose to live in the suburbs because housing and condos are too expensive in Montreal.

I found it a bit strange that you said earlier that you were sympathetic to the situation of first-time homebuyers. Aside from being sympathetic to their situation, what can you tell them so that they understand you want to help them?

[Evan Siddall]

I don't want them to lose their homes, and I don't think—pardon?

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

They don't have homes.

[Evan Siddall]

I understand that, but if we were to support them infinitely, or even more, to buy a home, they could be in a position where they would lose their home through unemployment and too much indebtedness, so that was a concern.

We're also supporting the rental market through a program that was announced in the last budget called the affordable rental innovation fund, and the affordable rental housing financing initiative, both of which will increase the innovation around and the supply of rental housing across this country.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

In response to the questions asked by my liberal colleague regarding property purchases by Chinese investors, especially in Vancouver, you seemed to say that this didn't concern you. However, doesn't this phenomenon contribute to the housing bubble in the Vancouver region? You see the situation, but you don't do anything. You're an observer.

[Evan Siddall]

No. I suggested it is a factor, not the factor. There is certainly foreign investment in all major international cities, in particular in Toronto and Vancouver in this country. I am more concerned about the future of it than the current state of it.

It is certainly a factor, but the work we have done on the factors underlying escalating house prices has shown that there are three principle reasons for increased house prices. These are low interest rates, increased incomes and jobs, and immigration, which tends to arrive in Vancouver and Toronto.

On top of that, there is foreign investment, certainly, and domestic investment, which is an even larger factor than foreign investment in our country. There are income and wealth effects, and finally, there is constricted supply. In fact, in our work, the evidence would suggest that the two markets with the slowest and weakest supply response are in Vancouver and Toronto.

[The Chair, Liberal, Wayne Easter]

The last question goes to Mr. Grewal.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you for coming today. We really appreciate it.

I think the quintessential question for the government, the finance department, and most of the people involved is the balance between stabilizing the housing market and making sure that Canadians have confidence in the housing market, and then making sure that there's access to housing. A lot of the testimony we heard was that you're over-regulating. But then I go back to 2008 and the lessons learned in the United States, and say that a lot of Americans probably would have appreciated a little bit of regulation then, because when it unravelled, it unravelled so quickly.

My colleague spoke about data, and we asked a lot of questions on the data that's being looked at to come up with policy recommendations. We do have concerns with the data elements.

Can you please speak again in depth on what you think the government should be looking at right now, because in your testimony today you said you're still looking at the housing market? What indicators are you guys looking at? What do you guys think is the best way to judge if we have a stable housing market in Canada?