Prime Minister François Legault’s claim that rising house prices are a necessary evil and that Quebec must not “stay poor” just to keep house values lower than Ontario and Colombia has stunned several economists.
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“It’s just not true that real estate prices have to increase with average income,” says Valeri Sokolovski, professor of finance at HEC Montreal.
The real estate market, like any other market, is dependent on supply and demand, he adds. And the state should help to increase the supply of housing. “In many regions, the bureaucracy for building new settlements is still very high. There is also a labor shortage in the construction sector and the government can easily address this problem. The state can also grant grants to investors who build housing for the poorest members of society. But washing your hands and saying that expensive housing is a side effect of economic growth is not a solution.
The same applies to the Montreal Economic Institute (IEDM). “Ontario real estate prices are becoming an obstacle to economic development and an injustice to the youngest. I don’t even know if I’d rather import this trend of housing inflation in Ontario or even the Maple Leafs,” the MEI CEO responded with a pinch of humor on his Twitter account.
“When property prices rise quickly, it’s because we’re not building enough to meet demand,” adds Gabriel Giguère, an economist at MEI, in an interview.
“The recent rise in house prices has outpaced wages in Quebec. We don’t want it to become an issue of intergenerational equity, as is already the case in Ontario and British Columbia,” he explains. “To be clear, inflation in house prices is not synonymous with wealth, but rather a symptom of a lack of supply in the market.”
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