Yes. Somebody should do something about high house prices. You are somebody. And whatever you do would count as “something”. So do it!
Based on recent reports, I worry that this is the thinking style of the new federal government. The Finance Minister has talked about doing a “deep dive” into the data. They must be feeling a lot of pressure from people in Toronto and Vancouver to do something about high prices but media headlines often overlook the real problems.
A bit of perspective would help. The last Prime Minister had an M.A. in Economics and, still, his policies such as “boutique tax credits” ignored most of the simple advice given in Econ 101. Econ 101 tells us that prices are never a problem. (To be very clear: prices being “high” is not the definition of a “price bubble”!) In a market context, they are always a symptom of something else (i.e. matching the demand curve to the supply curve). Continue reading