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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 Vancouve

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.

kareemm 10y ago
Thanks for clarifying. Totally agreed that economically speaking Toronto is more diversified and stronger than Van and a collapse in housing will crush Van. IIRC real estate, construction etc still produce more than 10% of Toronto's GDP. Still don't totally understand "why now" wrt Toronto's market taking off if the answer doesn't include foreign money as a main driver.
- randomdata 10y ago
  Why now? Perhaps because millennials are getting older? Next to the boomers, they represent Canada's largest generation, and within the last 5 years started to reach the age where one normally starts to gain meaningful savings and starts to settle down to raise a family. They are also more likely than previous generations to want to live in the downtown of major cities. They also reached this stage of life as we dropped interest rates to practically zero, enabling them to afford much more than anyone before them. What was being served by dorm rooms (if you recall, the postsecondary schools had to go build-crazy in the early 2000s to accommodate these same people) and bachelor apartments rentals now wants to own multi-occupant homes – preferably of the detached type – without having to leave the area they established themselves in during early adulthood. I don't think foreign money can ever explain "why now". Even if we agree that there is foreign money being invested, there still has to be some underlying driver to make them stand up and take interest in that investment opportunity. We can assert that it is not simply foreign money wanting to own a piece of Canada, as many parts of the country are only keeping up with inflation, and sometimes not even that. I think there had to be some change in the makeup of, most notably, Toronto and Vancouver that made it appealing now, and I suggest it is down to these demographic shifts.

kareemm 10y ago

Thanks for clarifying. Totally agreed that economically speaking Toronto is more diversified and stronger than Van and a collapse in housing will crush Van. IIRC real estate, construction etc still produce more than 10% of Toronto's GDP. Still don't totally understand "why now" wrt Toronto's market taking off if the answer doesn't include foreign money as a main driver.

randomdata 10y ago
Why now? Perhaps because millennials are getting older? Next to the boomers, they represent Canada's largest generation, and within the last 5 years started to reach the age where one normally starts to gain meaningful savings and starts to settle down to raise a family. They are also more likely than previous generations to want to live in the downtown of major cities. They also reached this stage of life as we dropped interest rates to practically zero, enabling them to afford much more than anyone before them. What was being served by dorm rooms (if you recall, the postsecondary schools had to go build-crazy in the early 2000s to accommodate these same people) and bachelor apartments rentals now wants to own multi-occupant homes – preferably of the detached type – without having to leave the area they established themselves in during early adulthood. I don't think foreign money can ever explain "why now". Even if we agree that there is foreign money being invested, there still has to be some underlying driver to make them stand up and take interest in that investment opportunity. We can assert that it is not simply foreign money wanting to own a piece of Canada, as many parts of the country are only keeping up with inflation, and sometimes not even that. I think there had to be some change in the makeup of, most notably, Toronto and Vancouver that made it appealing now, and I suggest it is down to these demographic shifts.