Would a ban on blind bidding make homes more affordable?

By  Kunal Sawhney
Oct 4, 2021


The Canadian snap election is over, and the debate around its need, given the House of Commons remains the same as before, is fading as well. But what is not over and will now knock on the doors of the party forming the government are the aspirations and expectations of Canadians, which shaped their voting preferences.

These are unprecedented times. Perhaps Canadians read the platforms of political parties more carefully than they usually do during elections. Several pledges by the Liberals concern the housing market in Canada. Among other things, the party declared that a ban on blind bidding during real estate transactions would follow their return to Ottawa. Such bids do not let competing buyers know how much other people are offering for the same property.

Do blind bids exist elsewhere?

In Australia, the house sales process is in stark contrast to how it is in Canada.
For almost two centuries, houses in Australia have usually changed hands in an open bidding process, conducted in an auction style. Prospective buyers gather in the open area outside the house to try and outbid others.
Canada’s housing market is notorious for lack of transparency. Though there are valid arguments in favour of blind bidding, advocacy groups have pinned the blame for the frenzy in house prices on blind bidding. Their argument appears reasonable. A bidder does not know how much the second-highest bid is and hence the highest bid could be tens of thousands of dollars in excess.
That the Liberals’ pledge is a sure-shot way to make houses affordable is debatable. But unfortunately, no reliable study can point toward the advantage of one bidding type over the other.
The argument against open bids is also reasonable on some counts. The auction-style bidding that is famous in the Australian real estate market can trigger impulsive spending by competing bidders. In open bidding with little time to think about the justification for a higher bid, the bidders may speculate higher and higher. Consumerism in advanced economies, be it Australia or Canada, can trigger ego clashes.
Another argument is, what if the seller or the agent unscrupulously manipulates the open bidding war? This might add some tens of thousands of dollars to the final price. And what if the buyers decide to bring down prices of housing assets by collectively bidding at lower-than-justifiable prices? Retail investors in the U.S. did something of this sort to the stock market by artificially pushing up meme stocks like GameStop.

Is it even possible to ban blind bidding?

Experts say that the federal government can do little in this regard because the provinces have jurisdiction over the passing of any such legislation.
Further, the new government will face resistance from Realtors and their associations. For example, the proposal to ban blind bidding met with criticism from the Ontario Real Estate Association and CREA. They say the measure is counter-productive and “criminalizes” families.
Consider this. House prices in Australia are surging at the fastest pace in almost three decades. According to industry experts, house price surges have far outpaced wage growth in Australia. In Canada, both the sales volume and the average price have been falling over the past few months. This is not the scene in Australia, where the price is growing monthly.
No two markets are the same, and no single method of transaction can be the best.
A ban on blind bidding is in no way a guarantee that houses will become affordable. Before Canada embarks on the ambitious yet controversial move to ban blind bids in the housing market, the federal government will likely concentrate on programs to help low-income and first-time buyers.