Finance Committee on Jan. 21st, 2022

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

—we'll suspend at this time.

[An hon. member]

For who?

[Pierre Poilievre, Conservative, Carleton, ON]

For whom? Who are the phone lines for?

Mr. Chair—

[The Chair, Liberal, Peter Fonseca]

Yes—

[Pierre Poilievre, Conservative, Carleton, ON]

—are you having an audio problem? Are you have difficulty hearing the question?

[The Chair, Liberal, Peter Fonseca]

Mr. Poilievre, we have phone lines that we all—

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

We have phone lines—

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

—for this committee.

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[A voice]

It's “whom”, actually; “for whom”.

[Pierre Poilievre, Conservative, Carleton, ON]

For who's on the line?

[The Chair, Liberal, Peter Fonseca]

Mr. Clerk—

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Chair, I think we can hand the meeting over to the vice-chair, if you can't run the meeting.

[The Chair, Liberal, Peter Fonseca]

Mr. Poilievre, we have suspended the meeting.

We will get the phone lines up.

[The Chair, Liberal, Peter Fonseca]

Excellent.

I'm glad that Mr. Poilievre is done with his insults.

We're going to move to questions by members from the committee. We will start with our first round of six minutes for each member to ask their questions of the witnesses.

First up is the Conservatives.

Mr. Poilievre, you have six minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Ms. Romy, your organization, the CMHC, predicted at the beginning of COVID that house prices would drop 9% to 18%, a prediction that made sense given that incomes dropped, GDP dropped, and immigration dropped—all things that you would expect would contribute to a drop in real estate prices—and yet they increased last year by 26%, a record-smashing increase.

Now, you did mention supply in your opening comments. Supply is a long-term problem in Canada, but it certainly cannot explain the sudden burst in prices, because of course we didn't lose 26% of our housing supply last year. Given that there was $200 billion more in house price purchases last year than in any year on modern record, where did all of that extra money come from?

[Romy Bowers]

Thank you, Mr. Chair.

In terms of.... Mr. Poilievre is absolutely correct. It is a very unusual financial crisis, the pandemic, in terms of you would expect house prices to decline during an economic decline, and they have not. The increase is due to the very particular nature of the pandemic. You need to put into context that there has been a supply shortage, and supply in housing takes a long time to respond to demand.

During the pandemic, there was very rapid change in the demand by Canadians for houses. You have probably all observed or have read in the newspaper that Canadians who were spending a lot of time at home were looking to change some of their housing choices. We feel that this played a role in increasing demand during a period where supply was constrained and—

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you for that.

Although that explanation would seem to make sense on the surface, if you look at the data, it doesn't add up, because even inner-city condo prices went up. You would expect that if people were vacating small properties to go to big ones, you would see prices go up for those bigger properties but prices go down for the inner-city smaller properties. That didn't happen. In fact, inner-city condos actually increased in price at an unusually fast rate.

We can debate all day why prices went up. The fact is they did, and those prices were paid with real money. The amount spent on housing went from $250 billion to $450 billion. The amount of mortgages going to investors increased by 100%, according to a fall Bank of Canada report.

My question was, regardless of why prices are going up, where did the money come from?

[Romy Bowers]

Thank you, Mr. Chair.

In response to the question about where does the money come from, when you're buying a house, money always comes from two sources: from the banking system through loans, or from personal savings. Those are the two sources, so that would be the direct answer to your question.

[Pierre Poilievre, Conservative, Carleton, ON]

Right, and the banking system, of course, is the major source, because we saw an explosion in the volume and the size of mortgages. It could not have come from wages, because of course wages were down. It must have come from the banking system. Where did the banking system get an extra $200 billion that it could lend out for five-year terms?

[Romy Bowers]

Thank you, Mr. Chair.

In response to wage decreases, I'd like to highlight in the first instance that the pandemic was quite exceptional in that it impacted people who were in the lower part of the income distribution more than the upper. At CMHC, when we're looking at our book of business, the people who were homeowners were actually more insulated from the impact of the crisis than others, so I think that provides some strength to the housing market.

[Pierre Poilievre, Conservative, Carleton, ON]

But where did the $200 billion of extra money come from? The banking system must have gotten that money from somewhere. Where did that come from?