Real Estate News

Opinion: Why Ontario’s provincial election matters to us all

Given the current Ontario housing market climate, the last thing this province needs is uncertainty — and bad politics brings uncertainty
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Nothing gets my pen to paper — or fingers to keyboard — faster than silly political promises or vote-grabbing bureaucratic policy. This upcoming Ontario election certainly ticks all those boxes. (Get it? Tick. Boxes. Vote. Ahh, forget it.)

In two days — on June 7, 2018 — voters get a chance to cast a ballot towards the next leader of the province. It’s an important vote, particularly given the current economic climate across North America. Yet, while all votes matter, all the time, this time it really matters. Why? Because there’s a strong chance that economic headwinds will significantly impact the nation’s economy, overall, and Ontario’s economy in particular.

Take, for example, last week’s announcement by the Trump administration to implement a 25% tariff on steel imports and 10% tariff on aluminum exports. Even if the federal government counters these new tariffs, the extra costs will have a significant impact on Canada’s steel exports to the United States. According to the Canadian Steel Producers Association (CSPA), steel manufacturing in Canada is a $14-billion-per-year industry that supports 20,000 direct jobs and another 100,000 indirect jobs. At present, steel is produced in 13 plants in five provinces (Alberta, Saskatchewan, Manitoba, Ontario and Quebec), with the bulk of the industry concentrated in Ontario (where six plants operate). Just ask Albertan’s what it’s like when a significant portion of your economy takes a hit (or, for that matter, Ontario autoworkers). Let’s face it, now is not the time to rock the economic boat.

No problem, right? Just vote for a fiscally prudent leader. For this election, the choice of leaders (and parties) couldn’t be more distinct. There is current Ontario Liberal leader, Kathleen Wynne; there’s Ontario NDP leader, Andrea Horwath and finally, there is Ontario PC leader, Doug Ford.

Here are the players

At first blush, it appears that most of these leadership hopefuls are campaigning on issues that involve income-tax, minimum-wage and childcare costs, but this doesn’t mean the state of housing in Ontario has fallen off the radar.

While the current provincial Liberals made no additional campaign promises regarding real estate, their recently launched non-resident buyer tax — introduced only last year — and their current silence, speaks to where they stand.

On the other hand, PC’s Doug Ford is alluding to scrapping this new 15% non-resident buyer tax on real estate. Andrea Horwath’s NDP party is promising to implement a speculation tax that targets Canadian and foreign home buyers, similar to the model enacted by the B.C. NDP government in their 2018 provincial budget.

Here is the playing field

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Bridgewell Group

Whether you’re with the “no tax on any buyer” crew (who wants to remove the foreign buyers’ tax) or the “tax ‘em all, I want my chance” crew (who wants more taxes), my big fear is both political promises could result in some very real and costly ramifications for all property owners in Ontario.

Let’s go back to August 2016, when the BC Liberals introduced a 15% foreign buyers’ tax in the Vancouver area. Those in the industry were given just six days to prepare for the implementation before the new tax took effect. As you can imagine, the rush to close a deal before the new tax ended up overwhelming the process and crashing the province’s land registry system. But it’s the longer-term impact of that tax that I find most interesting.

At first, buying activity dried up. It was like standing in an empty field after the teams, the band, and the spectators went home. Nothing but crickets — and debris. Six months later — in January 2017 — the B.C. housing market would surge and would hit record-breaking activity and pricing highs.

Apparently, the buyers hadn’t left. They’d simply paused and waited for an uncertain market to settle and, once it appeared that the property market wasn’t going to crash, buyers jumped back in. It was a bad political policy aimed at getting votes. Not only did it fail to achieve its aim but it prompted market uncertainty in an economic sector that made up 18% of B.C.’s GDP (in 2017, according to Statistics Canada data). To put this in perspective, mining, quarrying, oil and gas made up 17% of Alberta’s economy in the same year. (Overall, real estate makes up about 20% of our national GDP.)

Here is the ticking time-bomb

So, how does this fit in with the current Ontario election? Well, you have one party promising a reversal of housing policy (PCs), one party going with the status quo(Liberals) and another party doubling down (the NDP). The question to ask is which path will prompt the least uncertainty in Ontario’s housing market? The answer to this question should help guide you during Thursday’s election.

I’m not endorsing one party over the next. I really have no skin in this game. I no longer live in Ontario, although I do have economic and personal ties to the province. Still, I think all Canadians would be wise to pay attention to Ontario’s election results as any uncertainty introduced into Ontario’s housing market would only compound the natural market correction the Greater Toronto Area and other hot Ontario real estate markets are currently experiencing.

Uncertainty kills

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How do I know? Because Canadians already had a test run in February.

On February 5, 2018, the Dow Jones Industrial Average posted the largest-ever points drop in history. The markets in Canada and the U.S. followed suit and there was palpable fear, even amongst everyday consumers.

In hindsight, we now know that this sell-off actually started on Friday (February 2) in response to data that showed a better-than-expected wage growth in the U.S. (climbing wages means more costs for employers, this prompts price increases, which feeds inflation. All these rising costs mean less profit for investors, which is why an investor may choose to minimize losses, at that time). This initial market drop was an “overdue correction,” explained Brian Belski, chief investment strategist at BMO Capital Markets, in a variety of media interviews. But then human fallacy and our reliance on computers took over. In hindsight, we now know that the crazy market sell-off that happened on Tuesday was due to automatic sell orders (where investors can limit their losses by automatically asking their online trading accounts to sell certain portfolio holdings if prices drop below a set limit) and human fallacy. As Belski stated in a February interview with, “the biggest problem with what’s happening right now is that the majority of investors lack perspective.”

To be truthful, I don’t expect human behaviour to change all that much before or after this election. That’s why I think the best option is the provincial party that’s more than happy to not rock Ontario’s economic boat. In my mind, the absolute worst thing you could do right now is to change the rules and regulations that impact Ontario’s housing market. The market is already correcting and there are other economic headwinds heading towards the province. It’s just bad politics to make these promises. And in movie-story endings (and sometimes real life), bad politics never wins.

For a review of where the parties stand on the biggest issues, read MoneySense’s “Where the parties stand on issues that affect your wallet.

Romana King
Romana King

Romana is an award-winning personal finance writer with an expertise in real estate. She is obsessed with the property marketplace and is the current Director of Content at Zolo.