4 ms·

While yes, there is a serious bubble going on here in Toronto, it's also important to note the complex causes. Canada has something like 240,000 immigrants per

by mabbo 9y ago

While yes, there is a serious bubble going on here in Toronto, it's also important to note the complex causes. Canada has something like 240,000 immigrants per year, and half of them come to the Toronto region- or 10,000 people per month. Then you add in the thousands of Canadians who are moving to the city as small towns and suburbs stop being attractive. There's a greatly increased demand for housing here. But supply is tricky. Toronto is full, land-usage-wise. There's something like two small parcels left (Downsview Park and I forget the other place) where there is honest-to-goodness undeveloped land. Apart from that, all new homes are in the suburb cities around Toronto. This means all new housing supply in the city is from building up and other densification- which is moving too slowly. The suburb cities are also growing like mad, but the infrastructure to support all that growth isn't there, causing smaller price booms nearby any Go-train station. But that's just the start. High demand, low supply caused housing prices to rise- leading to speculators buying second homes to flip, which shrinks the supply. It leads to people buying homes they don't want, at prices they can barely afford, because they plan to sell it in 3 years for a profit. The bubble inflates. So why pop now? Ontario passed laws saying foreign buyers have to pay an additional 15% tax. And foreign buyers were a large chunk of sales. The latest numbers say sales are down something like 50% or more. Prices will start to sink soon. When the Bank of Canada finally raises interest rates to prevent total catastrophe on the exchange rate, things will really get wild. In Canada, most mortgages have to be renegotiated every few years- how many of them are going to have homes worth well less than their mortgage with rates so high they can't afford to make payments? That leads to a 2008-USA style pop. It's going to be a bumpy ride... Edit: also worth noting, this is just Toronto. Vancouver has some similar dynamics. The rest of Canada may not have a housing bubble at all- they'll just have to deal with the economic fallout of this mess.

asdf33323 9y ago
You forgot to note that Vancouver has returned to all time high prices in all housing types 6 months after their tax. http://www.mikestewart.ca/wp-content/uploads/2017/06/Vancouver-Real-Estate-Price-Chart-from-January-1977-to-May-2017.png http://www.mikestewart.ca/wp-content/uploads/2017/06/Vancouv...
- mabbo 9y ago
  Ugh, seriously? I hadn't heard that. I officially don't understand how markets work anymore.
  - verelo 9y ago
    Hint: Governments have more perceived control than actual control. It's seriously disappointing, but if the claims by people crying out about "Chinese money" are correct, 15% was never going to be enough. If your concern as an individual is your currency losing 50% of it's value over night [likely worse case for these individuals], then a 15% tax, even in a bubble market starts to look like a good deal.
    - gpm 9y ago
      But that shouldn't be the alternative for these individuals. The alternative should be doing the same thing somewhere without a tax. Say... Toronto.
      - verelo 9y ago
        Which they are, but in the case that you need to get to your 'asset' Vancouver is a hell of a lot closer so it's a preferable option. As someone who regularly commutes to the other side of the world, i feel like what I'm saying probably sounds odd if you don't...but i suspect this is a major factor.
  - nikanj 9y ago
    The US, Japan and the EU are all printing absurd amounts of money. That "stimulus" needs to go somewhere, and right now it's going to every single asset class. The central banks wanted inflation, but they got some perverted form, where wages and prices remain stagnant, and only stocks/real estate/etc have had their prices increase.
    - Danihan 9y ago
      So what's next?
dugditches 9y ago
Seems to get swept under the rug. But Toronto's 'bubble' is not inside a bubble. It has huge push on the surrounding City housing markets. People either leaving Toronto to retire selling while prices are high. Or simply people giving up on Toronto and moving outside the city to commute, happy to pay high prices for the city but low compared to Toronto. The thing is labor/wages in smaller towns hasn't increased to match the rising house prices. A city like Toronto with lots of jobs the costs can be justified. But when you have 'rich' people from Toronto come in to buy a home they push local First Time buyers/less affluent out or cause them to take on bigger mortgages(and when rates go up with their lower incomes, they'll suffer most).
- slantyyz 9y ago
  >> Seems to get swept under the rug. But Toronto's 'bubble' is not inside a bubble. I live in Markham (suburb bordering the north end of Toronto) -- houses here get sold over asking within days of the listing, and most of the houses in my area are actually occupied by the owners. The demand appears to be real. Any time a house in my area has an open house, there are piles of cars on the street. I've seen home prices in my neighborhood triple in the 12 years I've been here, and houses here are more expensive than a lot of areas inside the 416. Our property taxes are also generally higher than Toronto.
pyre 9y ago
> how many of them are going to have homes worth well more than their mortgage with rates so high they can't afford to make payments Don't you mean the other way around? Homes worth less than the mortgage?
- mabbo 9y ago
  Thanks, you are correct.
marxidad 9y ago
There are at least 99,000 homes in the GTA that are not occupied. They are just owned as investments. 20% of these are in the Concord suburb, however.
slantyyz 9y ago
>> Ontario passed laws saying foreign buyers have to pay an additional 15% tax. And foreign buyers were a large chunk of sales. The latest numbers say sales are down something like 50% or more. Prices will start to sink soon. If prices level off in the GTA (I don't think prices will sink), I think it will be because of the upcoming bylaws relating to AirBnB more than the foreign buyer tax.
dgudkov 9y ago
Oh, please, stop repeating the mantra about 120K immigrants flocking into Toronto every year. Quite a lot people are leaving the city due to insane real estate market as well as retirees, going as far as St.Catharenes. Nobody knows how many exactly, therefore no good numbers on the net inflow (which is still positive, though).

by mabbo 9y ago

asdf33323 9y ago

You forgot to note that Vancouver has returned to all time high prices in all housing types 6 months after their tax. http://www.mikestewart.ca/wp-content/uploads/2017/06/Vancouver-Real-Estate-Price-Chart-from-January-1977-to-May-2017.png http://www.mikestewart.ca/wp-content/uploads/2017/06/Vancouv...

mabbo 9y ago
Ugh, seriously? I hadn't heard that. I officially don't understand how markets work anymore.
- verelo 9y ago
  Hint: Governments have more perceived control than actual control. It's seriously disappointing, but if the claims by people crying out about "Chinese money" are correct, 15% was never going to be enough. If your concern as an individual is your currency losing 50% of it's value over night [likely worse case for these individuals], then a 15% tax, even in a bubble market starts to look like a good deal.
  - gpm 9y ago
    But that shouldn't be the alternative for these individuals. The alternative should be doing the same thing somewhere without a tax. Say... Toronto.
    - verelo 9y ago
      Which they are, but in the case that you need to get to your 'asset' Vancouver is a hell of a lot closer so it's a preferable option. As someone who regularly commutes to the other side of the world, i feel like what I'm saying probably sounds odd if you don't...but i suspect this is a major factor.
- nikanj 9y ago
  The US, Japan and the EU are all printing absurd amounts of money. That "stimulus" needs to go somewhere, and right now it's going to every single asset class. The central banks wanted inflation, but they got some perverted form, where wages and prices remain stagnant, and only stocks/real estate/etc have had their prices increase.
  - Danihan 9y ago
    So what's next?

dugditches 9y ago

Seems to get swept under the rug. But Toronto's 'bubble' is not inside a bubble. It has huge push on the surrounding City housing markets. People either leaving Toronto to retire selling while prices are high. Or simply people giving up on Toronto and moving outside the city to commute, happy to pay high prices for the city but low compared to Toronto. The thing is labor/wages in smaller towns hasn't increased to match the rising house prices. A city like Toronto with lots of jobs the costs can be justified. But when you have 'rich' people from Toronto come in to buy a home they push local First Time buyers/less affluent out or cause them to take on bigger mortgages(and when rates go up with their lower incomes, they'll suffer most).

slantyyz 9y ago
>> Seems to get swept under the rug. But Toronto's 'bubble' is not inside a bubble. I live in Markham (suburb bordering the north end of Toronto) -- houses here get sold over asking within days of the listing, and most of the houses in my area are actually occupied by the owners. The demand appears to be real. Any time a house in my area has an open house, there are piles of cars on the street. I've seen home prices in my neighborhood triple in the 12 years I've been here, and houses here are more expensive than a lot of areas inside the 416. Our property taxes are also generally higher than Toronto.

pyre 9y ago

> how many of them are going to have homes worth well more than their mortgage with rates so high they can't afford to make payments Don't you mean the other way around? Homes worth less than the mortgage?

mabbo 9y ago
Thanks, you are correct.

marxidad 9y ago

There are at least 99,000 homes in the GTA that are not occupied. They are just owned as investments. 20% of these are in the Concord suburb, however.

slantyyz 9y ago

>> Ontario passed laws saying foreign buyers have to pay an additional 15% tax. And foreign buyers were a large chunk of sales. The latest numbers say sales are down something like 50% or more. Prices will start to sink soon. If prices level off in the GTA (I don't think prices will sink), I think it will be because of the upcoming bylaws relating to AirBnB more than the foreign buyer tax.

dgudkov 9y ago

Oh, please, stop repeating the mantra about 120K immigrants flocking into Toronto every year. Quite a lot people are leaving the city due to insane real estate market as well as retirees, going as far as St.Catharenes. Nobody knows how many exactly, therefore no good numbers on the net inflow (which is still positive, though).