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The fact that the market is still (barely) accessible to top 2% earners doesn't change the fact that it could be accessible to many more people, without harming

The fact that the market is still (barely) accessible to top 2% earners doesn't change the fact that it could be accessible to many more people, without harming anyone but a small cadre of real estate agents and speculators, if the city would allow responsible intensification of existing neighbourhoods with midrise infill construction. 3 years ago your friends might have needed only $100k income for that semi, and in 3 years it will require $400k. Will your friends be earning $400k in 3 years? I doubt it. It's Toronto, not San Francisco. In 3 years the number of families that could afford that semi-detached home went down by a factor of 6. [1] That's a problem. I agree with you that the Toronto situation isn't as bad as others because Toronto has the most robust economy in Canada. A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country. I don't think the market will ever "crash". But the city's growth will be limited if the income needed to live in its core continues to rise from top 20% (2005), to top 10% (2013), to top 2% (2017) to top 1% and beyond. How will business attract highly mobile tech workers when a home in Toronto comes the same as SF but salaries are 1/2 or less? Since you live in Toronto you know the city is doing a desperately bad job of building new mass transit to alleviate the shortage/cost of housing the central parts of the city. [1] http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/famil105a-eng.htm http://www.statcan.gc.ca/tables-tableaux/sum-som/l01/cst01/f...

kareemm 10y ago
> A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country. So what's your theory about why Toronto has seen 20%+ YoY appreciation? Why now?
- eigenvector 10y ago
  In no particular order: 1. Historically low mortgage rates and weak rules on who can access government-insured high-leverage mortgages 2. Softness in the other, non-Toronto, engine of the Canadian economy - the Alberta oil industry. Lots of people who left the GTA to work out west are migrating back now 3. Redirection of foreign capital from Vancouver after growing public outrage and many disturbing investigative reports on fraud, money laundering and tax evasion in the Vancouver market - this probably accounts for a lot of the change from 2015 to 2016/2017 4. Positive feedback effect as boomers sitting on $1M+ houses sell them, downsize, but give much of the proceeds to their kids to buy back into the market at even higher prices 5. Weak CAD amplifying the effect of (3)
  - kareemm 10y ago
    Perhaps I misunderstood your position. It sounded like you were saying that Toronto is a magnet for people from around the country, but when I asked you to clarify that, you only provided one reason that supports that position (#2). Have you seen data to suggest this is having an outsized impact on GTA demand? It seems clear than #3 and, less so, #1 and 5 are driving the majority of demand. I'm not sure how one can explain the decoupling of prices from incomes without either a massive influx of capital or lax lending from the banks. The latter doesn't seem to be an issue, which leaves the former. If you're curious, read the PDF from the SFU prof that I linked to in the top comment in the thread. It's a summary of the data and is an excellent read if you're trying to unpack what's really going on (in Vancouver, but a lot is applicable to Toronto).
    - eigenvector 10y ago
      It's really difficult to conclusively measure the relative size of these impacts because they're all happening at the same time. I think comparing with Vancouver, Toronto has a larger share of organic demand vs induced or external demand because it has a larger and more diverse economy. I live in BC (moved from Toronto in 2014), so I've watched the very similar scenario play out in Vancouver and I think the case for foreign investment as the primary driving factor is pretty strong in Vancouver. It's difficult to prove because the government stubbornly refuses to collect data in a robust way, but what data does exist points to that conclusion. Vancouver is a smaller market, so it's easier to isolate the impact from, for example, the Immigrant Investor Program. But I agree that the only coherent reason why Toronto saw such a big spike in 2015/2016 is probably related to redirection of foreign capital that would have otherwise gone to Vancouver. But to be clear, I didn't mean to say that the organic factors in Toronto justify the 20% YOY growth, just that in contrast with Vancouver there is more inherent strength in the market to cushion it from taking a big haircut if and when foreign investment tails off. In the Lower Mainland, real estate and associated construction industries account for around 1/3rd of total economic output - which means BC is more dependant on the Lower Mainland housing market than Alberta is on oil. Toronto at least doesn't have that potential double-whammy of having housing tank and losing its main economic driver at the same time. Housing is outpacing Toronto's economy, but housing IS Vancouver's economy. The latter scenario is a lot more dangerous, IMO.
verelo 10y ago
Honestly, I agree with you on all this. Just because I don't think it's too wild today, doesn't mean I love the trend. We need to double down on education, support the creation of new businesses, make massive steps forward in terms of transit networks and reduce the future need for high "demand" side in Toronto. If we invest in other areas now (that is not to say we don't invest in TO any less), it's possible that a more sustainable growth curve for TO will come to exist. Oh, and NOT let Kevin O'leary win the PC leadership.

kareemm 10y ago

> A lot of the demand is driven simply by the fact that the city is a magnet for people from all over the country. So what's your theory about why Toronto has seen 20%+ YoY appreciation? Why now?

eigenvector 10y ago
In no particular order: 1. Historically low mortgage rates and weak rules on who can access government-insured high-leverage mortgages 2. Softness in the other, non-Toronto, engine of the Canadian economy - the Alberta oil industry. Lots of people who left the GTA to work out west are migrating back now 3. Redirection of foreign capital from Vancouver after growing public outrage and many disturbing investigative reports on fraud, money laundering and tax evasion in the Vancouver market - this probably accounts for a lot of the change from 2015 to 2016/2017 4. Positive feedback effect as boomers sitting on $1M+ houses sell them, downsize, but give much of the proceeds to their kids to buy back into the market at even higher prices 5. Weak CAD amplifying the effect of (3)
- kareemm 10y ago
  Perhaps I misunderstood your position. It sounded like you were saying that Toronto is a magnet for people from around the country, but when I asked you to clarify that, you only provided one reason that supports that position (#2). Have you seen data to suggest this is having an outsized impact on GTA demand? It seems clear than #3 and, less so, #1 and 5 are driving the majority of demand. I'm not sure how one can explain the decoupling of prices from incomes without either a massive influx of capital or lax lending from the banks. The latter doesn't seem to be an issue, which leaves the former. If you're curious, read the PDF from the SFU prof that I linked to in the top comment in the thread. It's a summary of the data and is an excellent read if you're trying to unpack what's really going on (in Vancouver, but a lot is applicable to Toronto).
  - eigenvector 10y ago
    It's really difficult to conclusively measure the relative size of these impacts because they're all happening at the same time. I think comparing with Vancouver, Toronto has a larger share of organic demand vs induced or external demand because it has a larger and more diverse economy. I live in BC (moved from Toronto in 2014), so I've watched the very similar scenario play out in Vancouver and I think the case for foreign investment as the primary driving factor is pretty strong in Vancouver. It's difficult to prove because the government stubbornly refuses to collect data in a robust way, but what data does exist points to that conclusion. Vancouver is a smaller market, so it's easier to isolate the impact from, for example, the Immigrant Investor Program. But I agree that the only coherent reason why Toronto saw such a big spike in 2015/2016 is probably related to redirection of foreign capital that would have otherwise gone to Vancouver. But to be clear, I didn't mean to say that the organic factors in Toronto justify the 20% YOY growth, just that in contrast with Vancouver there is more inherent strength in the market to cushion it from taking a big haircut if and when foreign investment tails off. In the Lower Mainland, real estate and associated construction industries account for around 1/3rd of total economic output - which means BC is more dependant on the Lower Mainland housing market than Alberta is on oil. Toronto at least doesn't have that potential double-whammy of having housing tank and losing its main economic driver at the same time. Housing is outpacing Toronto's economy, but housing IS Vancouver's economy. The latter scenario is a lot more dangerous, IMO.

verelo 10y ago

Honestly, I agree with you on all this. Just because I don't think it's too wild today, doesn't mean I love the trend. We need to double down on education, support the creation of new businesses, make massive steps forward in terms of transit networks and reduce the future need for high "demand" side in Toronto. If we invest in other areas now (that is not to say we don't invest in TO any less), it's possible that a more sustainable growth curve for TO will come to exist. Oh, and NOT let Kevin O'leary win the PC leadership.