Trudeau promised transparent bidding if re-elected for another term. Here’s what it means for housing prices if he follows through
Kelly Medeiros has been bidding on houses for months. So far, the 31-year-old has made five offers on homes in the Durham region since July and has lost every time to a higher offer, falling short anywhere from $20,000 all the way up to $110,000.
The problem, the Toronto-based media professional says, is that she hasn’t known how far off her offers have been from winning until the houses sold and the sale price was made public.
“If there are 10 offers around [the same amount] and somebody learns that there are 10 offers, they often panic and offer way more than they need to,” she says. “Like maybe you could have had that house by offering an extra $10,000, but instead, you’ve offered $100,000 more.”
Canadians like Medeiros are experiencing the frustrating side of “blind bidding” — a common real estate practice, also known as sealed or closed bidding — that prevents hopeful buyers from knowing what others are offering for the property. The tactic is hotly debated and often blamed as a contributing factor in Toronto’s overinflated market. Leading up to the 2021 federal election, the Liberals made the promise that if re-elected they would ban blind bidding nationally, by implementing a Home Buyers’ Bill of Rights , to help cool housing prices and make the process of buying a home more “fair, open and transparent.”
But experts have mixed opinions about whether a flat-out ban is the solution to bidding wars. Some say it won’t bring down prices at all.
According to Murtaza Haider , a professor of real estate management at Ryerson University, there’s plenty of anecdotal data and speculation that indicates closed bidding drives up housing prices. But there isn’t raw provincial data to determine how much, exactly, the practice is jacking up sales.
In Ontario, real estate rules prevent the selling agent from telling realtors and their clients the contents — that is, the offer amount — of competing offers. All they can disclose is the number of competing offers to every hopeful buyer.
To make meaningful change to the industry, the government’s first course of action, Haider says, should be to put together a commission or an advisory group that includes all stakeholders, including representatives of buyers, sellers, the real estate industry and the Canada Mortgage and Housing Corporation. From there, amendments to real estate rules can be made to enhance the marketplace — something that can be aided with technology.
Haider says a digital platform that allows the selling agent to show bidders what others are offering, without disclosing their names, would provide more transparency and help buyers make informed decisions. There’s already efforts to change up the way people buy homes in Ontario with On the Block , for example, an online auction platform that allows registered bidders to see other offers in real-time.
“Discouraging competition is not the point,” Haider says. “The point is that when more than one prospective buyer is competing, they are not doing so in ignorance.”
Nicki Skinner , a Toronto real estate agent with Bosley Real Estate, says that because real estate regulation is a provincial issue, it would be difficult for the federal government to implement a nation-wide ban on blind bidding. It’s likely going to be up to the provinces to determine new rules.
And even if another selling option does become popularized, like auctions — which are legal in Ontario, albeit not common — Skinner doesn’t think it would stop people from “overpaying” for what they want.
“If you’ve got two people who really want [a property], they will push the price up to the same level anyway,” she says of open auctions versus closed bidding.
That jives with what we know about consumer behaviour, says Tsur Somerville , an associate professor at the University of British Columbia’s Sauder School of Business who specializes in real estate. While transparency can help people feel confident that they’re not being taken advantage of — something that’s important in competitive markets — an open auction won’t solve Canada’s affordability problems. In fact, open auctions can result in similar financial outcomes as blind bidding, especially in sought-after markets.
Somerville says in Australia, where live auctions are common and often happen on the lawn of a property, prices in major cities like Sydney and Melbourne are high. In Sydney, housing prices are up nearly 21 per cent year-over-year as of August, according to property data company CoreLogic , and prices in Melbourne are up 13 per cent.
“Blind bidding is not the main thing, or even one of the top five things, that’s responsible for Toronto’s lack of affordability,” says William Strange , a professor of economic analysis and policy at the University of Toronto’s Rotman School. “I don’t know a single economist who believes that.”
As he sees it, “if blind bidding were so disadvantageous for consumers, you wouldn’t see sophisticated participants perfectly happy to jump in.”
The bigger problem, according to many experts, is a Toronto housing shortage that cannot meet demand. While the Liberals have promised to build, preserve or repair 1.4 million homes — including affordable housing — over the next four years across Canada, it’s unclear what that exactly entails, says Skinner.
“The city, the province and the federal government have to work together to figure out what assets they have that can be turned into housing, and how to do it quickly,” Skinner says. “And then, is that going to be subsidized housing, rental housing at market value? Or financially assisted housing? That part isn’t clear.”
Meanwhile, the existing stock in big cities like Toronto and Vancouver is going to remain competitive, she says, because they are central hubs and are on par with other major cities like New York. Not everyone is going to be able to buy the home they wish they had in the city they want to live in.
This is the reality Medeiros is facing. Even though she works downtown, housing prices in the city are forcing her to look in suburbs like Durham and Whitby. Both she and her fiancé work full-time, and even with dual incomes, they’re struggling to get into the market.
“When we’re putting in offers, we’re pretty much going in at our max almost every time,” Medeiros says. “So if we lose out, we know we offered our best. There’s no more money to give.”