The law of supply and demand is an incredible thing, too bad that we have so many politicians who ignore it. I bring this up for personal reasons. Due to a lack of housing in Canada, the Trudeau administration has banned foreigners from buying property there for at least two years. There is an exception for villages with a population of less than 5,000. During the pandemic, when foreign homeowners were banned from their homes, he threatened to levy a tax on their empty apartments.
Here in the United States, we are solving the housing crisis by building more places to live. According to Will Parker* of The Wall Street Journal, “apartment rents fell in every major metropolitan area in the U.S. over the past six months through January, a trend that is poised to continue as the biggest delivery of new apartments in nearly four decades is slated for this year.” This is a good thing since housing inflation has been a terrible burden for too many Americans.
Our housing problems in America are now regional, as people continue to move to Sun Belt states. Mr. Parker tells us that “rents in Tucson, Ariz., Tampa, Fla., and Miami metro areas are all 35% higher than in March 2020.” During the height of the pandemic, it became a common sight here in Vero Beach to see four or five cars with New York plates in front of homes with for sale signs on the lawn. That too is no longer the case. I expect the pressure on renters and homebuyers to subside throughout the Sun Belt as supply and demand restore order to pricing.
We are not there yet, and markets are beginning to realize it. Inflation is still too high, and I expect Jerome Powell to continue to raise interest rates. After that, rates are likely to remain high until inflation is tamed. In the meantime, supply chains are improving, and we are closer to the end than to the beginning. I shall discuss my view on this in the upcoming newsletter.
Levying punishing taxes on foreigners, as they are doing in Ontario, will not build more houses. Neither will banning foreigners (read Americans) cause new homes to mystically spring up from the dirt. I just sent my last check to my (very nice) Canadian accountant at his home in Deerfield Beach, Florida. After 40 years of visiting Québec, owning property there, and learning its literature, history, and language, the biggest lesson I learned is about the political risks to supply and demand. Oh well, I expect Biarritz to be beautiful this summer.
* Parker. W. " Apartment Rents Fall as Crush of New Supply Hits Market." The Wall Street Journal, Online | Real Estate/Property Report, Feb. 27,2023. https://www.wsj.com/articles/apartment-rents-fall-as-crush-of-new-supply-hits-market-2403c6ea?mod=Searchresults_pos2&page=1. Accessed on 03.02.2023.