Toronto House Price Bubble Goes Nuts

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Based on fundamentals? You gotta be kidding.

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%!

That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled!

The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422.

Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February. And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March.

Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success.

Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble. And the Bank of Canada, which has been fretting about the housing bubble for a while – always couched in its very careful terms – refuses to raise rates. Everyone is talking. No one dares to do anything real about Toronto’s house price bubble.




In Toronto, according the real estate folks, it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing, really. So TREB President Larry Cerqua is glad the efforts to tamp down on it all have not come to fruition, in part due to TREB’s vigorous lobbying:

“It has been encouraging to see that policymakers have not implemented any knee-jerk policies regarding the GTA housing market,” he said in a statement.

“Different levels of government are holding consultations with market stakeholders and TREB has participated and will continue to participate in these discussions,” he said. “Policy makers must remember that it is the interplay between the demand for and supply of listings that influences price growth.”

Singing a similar tune, Jason Mercer, TREB’s Director of Market Analysis, explained the basic supply and demand problem:

“Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings,” he said. “A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance.”

And he told policy makers to tread carefully: “As policy makers seek to achieve this balance, it is important that an evidence-based approach is followed,” he said. This is a gravy train, and it must be allowed to speed on until the last cent has been extracted.

It doesn’t take a genius to figure out that this will end in tears. What we don’t know yet is when it will end in tears, and whose tears it will end with. But we already know: When it does end in tears, real estate organizations will first be denying it, and then they’ll be clamoring for a bailout of their stakeholders – so it will end in the tears of others.

Even the big Canadian banks are fretting. “Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal Chief Economist Doug Porter warned clients. But the bubble’s deflation would push the city into a fiscal and financial sinkhole. Read…  Why Toronto (and Other Cities) Inflate Housing Bubbles to the Bitter End




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  98 comments for “Toronto House Price Bubble Goes Nuts

  1. Kasadour
    Apr 5, 2017 at 11:53 am

    It’s gotta be hard for buyers who are constantly being told no, I’m sorry you didn’t get this one either. So the buyer gives up. This could be how this market plays itself out – buyers become demoralized, they give up and move on. This creates a lot of stress for buying agents, too.

    On the policy side of it, the solution seems easy enough: Raise interest rates. That’ll take care of it. But it won’t happen, at least through spring and summer. Maybe policy makers should think about pacing this market a bit, spread it out some.

  2. OutLookingIn
    Apr 5, 2017 at 11:58 am

    It doesn’t help to have federal governments both north and south of the 49th that are ineffectual. As “Nero” in the White House fiddles, the “Boy Wonder” of Suffolk Drive twiddles!
    Much too busy with issues that have little to no relationship, to do with the real problems facing their respective societies.
    That’s why when the crunch does hit, it will surprise the majority with much hand wringing and gnashing of teeth. Then the witch hunts will begin in earnest, led by the fairy tale telling main stream media circus.
    Bubble, bubble, toil and trouble.
    – Real estate
    – Subprime auto loans
    – Student loan debt
    – The largest global bond bubble in history
    – Average total debt per household tops $100,000
    – Stocks with current insane valuations are not sustainable
    – etc. etc.

    • BFast
      Apr 5, 2017 at 12:20 pm

      As “Nero” in the White House fiddles, the “Boy Wonder” of Suffolk Drive twiddles!
      Love the descriptions.
      A Canadian

      • gunga din
        Apr 5, 2017 at 1:03 pm

        ummm…. that would be Sussex Drive, methinks

      • SA
        Apr 5, 2017 at 2:59 pm

        24 Sussex Drive

      • Anon
        Apr 5, 2017 at 3:21 pm

        The “Boy Wonder” for anyone not familiar with our Canadian politics is Justin Trudeau, the current Prime Minister who is the son of the former “fuddle duddle” Prime Minister, Pierre Trudeau. And oh boy, the apple doesn’t fall far from the tree.

      • robt
        Apr 5, 2017 at 8:48 pm

        The day after the Boy Wonder high school drama teacher was elected he refused to move into the Sussex Drive mansion because it was ‘unfit for human habitation’. It will need a ‘renovation’ supposedly costing 38 million dollars, in other words, probably 76 million if the usual government estimate formula applies.
        When Nero completed his vast Golden House, he supposedly said ‘Finally I can live like a human being’.
        Maybe they’re soulmates.
        Meanwhile, as soon as he gets back to Ottawa, his handlers send him out to the bush (or the Arctic) on another round of photo ops and townhall meetings.

    • Plato99
      Apr 5, 2017 at 1:36 pm

      The following is from a Real Estate office ad looking for mortgage agents and sales agents in Toronto Its a game that helps RE agents earn commissions, governments collect Land Transfer Taxes, and allow immigration through the back door. Everybody is a winner, except the young generation who are not able to buy anything decent to live in.

      The Century 21 ———— Real Estate Team provides full services and support to its associates.

      We are also Private Lenders / Real Estate Investors

      We can Lend up to 100% Financing (Zero Down) For Clients.

      We Lend Clients their Down Payment for a Mortgage. ‎

      Example if a Client is Buying a $400,000 Property We Can Lend the Client their 5% Down ($20,000)

      We Work with ALL Realtors and Mortgage Agents‎

      Here is the Best Part !!!‎

      If You are a Real Estate Agent they MUST Buy the House with YOU and When they SELL (in 1 Year or 5 Years or 10 Years or Whenever) They Have to SELL with YOU (If the Client Needs a Mortgage Agent We Have Mortgage Agents that We will Refer them To)‎(We work with All Realtors From All Companies Century 21, Re/Max, Homelife, etc)REPEAT BUSINESS!!!

    • Alistair McLaughlin
      Apr 5, 2017 at 2:50 pm

      Sussex Drive. Not Suffolk.

      • OutLookingIn
        Apr 5, 2017 at 3:22 pm

        Yes. Quite right.
        The PM’s residence that is under going tens of millions of dollars worth of renovations, compliments of the tax payer.

        • PIGL
          Apr 5, 2017 at 6:39 pm

          Actually not the prime minister’s personal residence … it’s a public building that’s been neglected for years.

          Do you want they should live in a cave?

          Seriously people to turn to get upset about trivial things.

    • OutsiderandHappyToBeOne
      Apr 6, 2017 at 3:31 pm

      Completely agree. None of these guys deal with the issues, but only ones that will get them elected for a second term to solidify their pensions/benefits and nothing more. Our Boy Wonder (a drama teacher) is more concerned about bringing more immigrants and imposing Islamaphobia laws, rather than focusing on sustaining the already critical mass here that don’t have jobs, lean on social/welfare systems, and hates Western Canadians just like his frog father. I’ve yet to see J.Trudeau deal with one economic issue in his 18 months of office. He seems more concerned with taking selfies and posting on the web. All i can say is i didn’t vote for him.

      Couple this up with most major G20 countries hold too much debt, every asset class in a bubble (ie. stocks, real-estate, bonds), it would be nice to see a leader actually deal with this. Unfortunately all these leaders are in bed with the banking and government cartels favouring deregulation for their convenience that nothing will be done.

  3. NotSoSure
    Apr 5, 2017 at 12:06 pm

    It almost looks like economic war. Murican Fed prints money, plays havoc with Emerging market economies. Now the Emerging economies are printing money and wreaking havoc on advanced economies.

    • Intosh
      Apr 5, 2017 at 4:47 pm

      Quite right. Naomi Klein terms this as the return of the shock doctrine tactics. The developed world exercised these tactics to emerging markets and now, these same tactics return to be imposed to markets where they originated.

      This is not limited to printing money but applies to many many other policies. When Trump vows to bring jobs back to America, what kind of jobs and working conditions do you think will appear?

  4. TJ Martin
    Apr 5, 2017 at 12:08 pm

    As a moment of levity paraphrasing the Bard if you will ;

    ‘ Double Bubble Toil and Trouble – Everyone’s Housing’s become a Bubble ‘

  5. bev kennedy
    Apr 5, 2017 at 12:14 pm

    Of course there will be tax hike based on improved valuations. Revenue has to come from somewhere
    And what many downsizers don’t realize is that there are not caps on condo fees hikes
    Especially with the proposed replenishment in three years. Can easily double the reserve fund fee portion of the building maintence. And this means a huge chunk of ch*nge for condo fees going up. Repeat. There are no caps on condo fees or rental charges for owners renting out m*ybe because they can no longer a6ford the soa3ing condo fees and taxes….edging those on fixed incomes closer to the mean streets. Yes that includes seniors
    And where does the unlocked money from sales go. Why to the very sa.e lax and gappy banking investment industry to massage through a4 profits for them. Not so much retail. Kaching Kaching kaching

    • PIGL
      Apr 5, 2017 at 6:43 pm

      Increases in properties do not create increased in civic expenditures therefore there is no reason why rates or total revenues should increase.

      The assessment on my property in YVR has almost doubled in three years but my taxes have not increased, at least not anything like in proportion.

      For some reason people here seem to assume that higher valuations or simply a windfall for city governments, I suppose because they are governments, hence evil. However I see no evidence offered to support that assumption.

      • robt
        Apr 5, 2017 at 9:03 pm

        The Land Transfer Tax, which used to be just a few thousand dollars in Toronto is now 33,000 for a million dollar house and 73,000 for a 2 million. That’s a windfall.
        And the market-based MPAC assessment scheme means property taxes and services have increased significantly – and the worst is yet to come when the new assessments, based on the market prices, hit.

        • Anon
          Apr 6, 2017 at 11:04 am

          robt,

          “And the market-based MPAC [Municipal Property Assessment Corp.] assessment scheme means property taxes and services have increased significantly – and the worst is yet to come when the new assessments, based on the market prices, hit.”

          You got that right. I’ve been telling people, ‘watch out, your property taxes are going to soar–that’s the whole point of this inflated RE market.’ The “flippers” may benefit but those who bought to actually live in and grow will get burned. This GTA (Greater Toronto Area) is not Silicon Valley or San Fran.

      • Lee
        Apr 6, 2017 at 1:49 am

        Lucky you.

        My rates (RE taxes to you Yanks) have more than doubled in the last ten years here in my little corner of Melbourne.

        For that increase I haven’t any increase in the services to my property or better roads, environment, or infrastructure where I live.

        The number of people working for the local government have increased along with the number of unfixed roads and cracks in the sidewalks.

        And if I remember correctly the CEO of the council here makes around A$350,000 a year…………….

  6. Willy2
    Apr 5, 2017 at 12:20 pm

    – Are these “selling prices” or “listing prices” ? I ask because one canadian real estate analyst says that real estate prices in Toronto are already falling when one looks at the “selling prices”.

    – Same story for Vancouver. Prices are already falling when one looks at “selling prices”.

    This real estate analyst is called Mr. Ross Kay and he’s regularly interviewed by Howestreet.com. Mr. Kay uses the words “organized real estate” (compare that with “organized crime”).

    Sources:
    http://www.howestreet.com

    The latest audio interview with Mr. Kay:
    http://www.howestreet.com/2017/04/03/toronto-housing-bubble-exact-echo-of-vancouvers/

    • Apr 5, 2017 at 3:42 pm

      These are selling prices.

      Vancouver got hit with the transfer tax last August. So this market has since changed. And prices have trended down on a monthly basis, at least for a while. But then the government stepped in and offered first-time buyers some free money if they buy a condo – and voilá.

      I see no down trend in selling prices in Toronto.

      • Dave
        Apr 5, 2017 at 5:27 pm

        I live in Toronto and I can tell you the market is going to the MOON. Everything will be done to keep it up. If I had listened to the experts and sold my house 4 years ago Id be kicking myself.

        I see 99% of people are terrible at forecasting the future. If you bought long time ago and you can afford your payments, you have nothing to worry about. Your house would have to drop 50% to hurt you. That 50% drop is not going to happen.

        BTW: Renting is expensive in Toronto. If you rent, its hard to save any money for a down payment. Wages havent kept up with the cost of living (food, gas and housing).

        Although my house has gone up a lot, I think the whole thing is absurd! I am concerned for the next generation. The stock market is a joke to. I cant control it all I can do is try to live prudently and enjoy some of the time that I am on planet earth.

        BTW: This isnt a reply to your comment I am kinda rambling.

        • BixbyMan
          Apr 5, 2017 at 5:35 pm

          I live in Toronto, born and raised here and can assure you, 50% price declines have happened before and there is no reason to suggest they won’t happen again. Not only is it likely but baked in and undoubtedly be a decline much steeper than 50%.

        • Jack
          Apr 5, 2017 at 8:42 pm

          Bixby Man,

          You said, “50% price declines have happened before ” I was in the States back then so I don’t know–did property taxes decline 50% too?

        • Variance Doc
          Apr 6, 2017 at 12:37 pm

          “I see 99% of people are terrible at forecasting the future.”

          followed by

          “Your house would have to drop 50% to hurt you. That 50% drop is not going to happen.”

          You are in the 99%.

          What makes a fool is an inability to take even his own good advice – WILLIAM FAULKNER, Light in August

        • Gary
          Apr 7, 2017 at 6:17 pm

          Don’t assume the price drop will not be dramatic. American home prices peaked at nearly six times higher than the median household income in 2005–2007… right before the real estate crash. Guess where Canadian average prices sit now?
          https://www.facebook.com/photo.php?fbid=10155924976980278&set=a.10152211421295278.1073741825.632930277&type=3

      • Apr 5, 2017 at 8:50 pm

        A foreigners’ tax would have a lesser affect on the GTA than it did in the Vancouver area. If the banks were legislated to assume 20 percent or more of the mortgage risk in Canada (presently they assume no or zero risk) that would cause the entire real estate market to collapse right across Canada that I can assure you. If the crash is hard and fast enough no measures taken after that would rescue the real estate market it would be too late. All other measures would do (like taxing second and third properties higher limiting how many properties one could own, taxing empty properties) absolutely nothing.

        • Dave
          Apr 6, 2017 at 7:12 am

          I have been living in Toronto since the late 80’s and haven’t seen across the board 50% decline. It’s not going to happen. Before the late 70s Toronto was dead. Montreal was the the place to be in Canada.

        • Your Good Friend
          Apr 6, 2017 at 7:28 am

          It happens nevertheless.

          Maybe you weren’t paying attention?

    • Gunther
      Apr 5, 2017 at 5:59 pm

      A Relative of mine is looking for a Condo in downtown Toronto now. The market is hot withcondos selling on short notice and above asking. With the traffic congestion in Toronto moving out of town is not really an option. The Jobs are in Toronto and not outside of town.

      In local Toronto news are reports of appartment rents doubling and forcing tennants out since they can not afford the rent anymore.

      The website Zolo.ca shows properties on sale and give statistics.

    • Apr 5, 2017 at 8:57 pm

      Residential real estate prices in Toronto (just Toronto) fell .75 percent month over month. The figures just came out today.

    • robt
      Apr 5, 2017 at 9:14 pm

      Willy2, selling prices are running 20 to 30% over asking.
      Everything sells, and there are 20 or 30 offers on the table.

      • Your Good Friend
        Apr 5, 2017 at 9:16 pm

        ^lolol

  7. HB Guy
    Apr 5, 2017 at 12:32 pm

    I lived through 3 housing boom-bust cycles in Toronto in the 1970s and 1980s, and each one of them ended very badly. The current boom looks close to be close to the peak, although foreign buyers may prolong it.

    Apart from the obvious unsustainable debt-equity and housing price levels, consider a few other reasons why this is unlikely to last:

    1. Canadians cannot deduct mortgage interest or property taxes from their Federal or Provincial taxable income. So, no taxpayer subsidy for either.
    2. Canadian mortgage loans are made primarily by banksters, with the maximum term usually 5 years. Any significant change in the current structure of interest rates will significantly impact borrowers 1-5 years hence.
    3. Canadian mortgages are amortized of 25 years, not 30 as in the US. This isn’t necessarily a bad thing, as equity builds up faster, but it does increase payments for younger or first time buyers.
    4. Canadians earning a comparable pre-tax salary to someone in the US will have much less of it after tax because of much higher marginal tax rates. Someone earning $200,000 in Toronto will have an effective marginal tax rate of close to 49%, while someone earning the same salary in Orange or San Diego County is closer to 40%.
    5. The harmonized GST and Ontario Provincial Sales taxes are 13% on everything – even postage stamps! – whereas state sales taxes are typically in the 7.0-9.0% range and generally exclude services.
    6. Property taxes in Ontario, and Toronto specifically, are among the highest in North America. All that “free health care” isn’t exactly free…
    7. Consumer prices are typically 10-15% higher in Ontario than in the US after taking into account exchange rates, sales tax, etc.

    I haven’t touched on the fiscal position of the Province of Ontario’s Government, which is an absolute disaster. Gross provincial debt level is expected to reach $350 BILLION (with a “B”) in 2017-2018, or nearly 40% of Provincial Domestic Product. This is for a Province of under 13 million people, and is clearly not sustainable. Ontario is very likely the next major government entity to be forced into restructuring, if Illinois doesn’t beat them to it.

    My point in all of this is that owning a home in Toronto is an extremely costly proposition, notwithstanding prices. Many buyers in the past 1-3 years will likely lose their homes. The fiscal position of Ontario’s government is very scary, and likely to result in significant tax increases and service cutbacks, with a very weak underlying economy. Its dependence on the auto sector, which itself is likely to experience hard times in the next 1-3 years, will further weaken homeowner finances.

    In short, expect a significant plunge in Toronto prices, very soon.

    • Jack
      Apr 5, 2017 at 3:38 pm

      HB Guy,

      You didn’t mention that the province of Ontario currently pays out almost C$1 billion per month (that’s right–per month) in interest payments for its C$350 billion accumulated debt, and this is at a time of low interest rates!

      It’s at the bottom of this web page: http://www.ofina.on.ca/borrowing_debt/debt.htm

      • HB Guy
        Apr 5, 2017 at 4:00 pm

        Absolutely right, Jack! Here’s what the Fraser Institute had to say about Ontario’s finances a few days ago:

        https://www.fraserinstitute.org/sites/default/files/hold-the-celebration.pdf

        Note that the debt levels are approaching Puerto Rico’s and are significantly higher than California’s, which has run balanced budgets – sort of – for the past few years. More importantly, our bonded indebtedness is much lower than Ontario’s.

    • Apr 5, 2017 at 8:33 pm

      The Chinese caused the entire mess in the Greater Toronto area so one has only to look to China to know how the housing market in the GTA will end. EVERYTHING the Chinese touch becomes a ponzi just like back home in China. The people in the GTA haven’t seen what the Chinese have seen back home in China. Everything goes straight up then straight down as each and every Chinaman does the exact same thing.

      • Dave
        Apr 6, 2017 at 7:19 am

        Don’t blame the Chinese. Greed doesnt discriminate! Most people are greedy. Did the Chinese blow up the US hiusing market. Did they cause the previous financial crisis. Are they driving up the price of the crummy medical services in the US. Are they driving up the cost of the crummy education in the US. I dont think so.

        • Apr 12, 2017 at 10:13 pm

          I live in Canada and in a Chinese area. You obviously don’t live in Canada so your opinion is dumbfounded. I witnessed the very first all Chinese city in Canada. Agincourt a suburb of Scarborough, Ontario Canada. I learned a lot and fast and never forgot what the Chinese did to that city. Fast forward in time 30 plus years and the Chinese have done the exact same thing to every city they invade.

  8. Your Good Friend
    Apr 5, 2017 at 12:32 pm

    -Falling rental rates
    -Falling housing prices
    -collapsing demand
    -Inflation Adjusted Housing prices 300% higher than long term trend line
    -Record housing inventory
    -Rising delinquencies
    -Foreclosure moratoriums
    -Rampant subprime lending

  9. Maximus Minimus
    Apr 5, 2017 at 12:59 pm

    The Canadian housing market is on autopilot. The treasonous officers have deserted, and the soldiers are fighting it out in the trenches.

  10. Kent
    Apr 5, 2017 at 1:02 pm

    A few simple regulations:

    1. Banks cannot lend more than 80% of the value of a primary residence and 40% of a non-primary residence.
    2. Banks cannot lend more than 2x household take home pay based on prior year W-2, 1099, whatever.
    3. Banks cannot lend more than 2x average regional take home if the buyer is incorporated.

    Will stop housing bubbles in its tracks every time.

    • Adam Smith
      Apr 5, 2017 at 1:29 pm

      We are assuming the government wants to stop the housing bubbles. Is it really the case? If they are getting a good chunk of their income from property taxes, why should they stop any bubbles? Or any fees and taxes from the sale of the property makes a significant contribution to the city/provincial budget, can we expect them to do much about it?

      I am old enough to understand that politicians care about their own well being more than anything else. And an honest to God politician is a rare breed. A voluntary pop of the bubble will be up to the people, most of whom play along, mainly out of ignorance. Thos who purchased a home before the bubble (majority of the owners) are mostly happy, because they feel rich and happy living in a million dollar condo. Mostly, they don’t want prices to go down. So, it is highly unlikely that the people in power will do much to put a pin to the bubble. The pop will come from external forces in the economy or geopolitics.

    • Shawn
      Apr 5, 2017 at 2:22 pm

      Haha good luck with that, considering how corrupt the various levels of government are in Canada with respect to the banking industry, getting all that into a law will never happen.

    • Apr 5, 2017 at 3:45 pm

      There’s a whole industry out there lending where banks can’t go, including lending for down-payments. Heck, even the Vancouver government is lending first-time buyers free of charge for a number of years part of their down-payment.

      • Maximus Minimus
        Apr 5, 2017 at 3:59 pm

        Indeed. Crookedness has come full circle: crooks are being pushed out of the market by a crooked government.

      • Lee
        Apr 5, 2017 at 5:43 pm

        Yeah and in Australia we have the First Homeowners Grant and other savings such as a stamp duty (transaction tax) reduction for these ‘special’ class of people.

        Why in the world is a government handing out money from one taxpayer to another in order for them to buy a house?

        Here in Victoria the grant is on any house/condo for a first home buyer up to A$600,000 in value.

        More middle class/upper class welfare.

        Not means tested in anyway so the people with a million dollars in income gets the same a person making A$50,000…………

        The program has changed over the years, but at one time the total of the grants was up to A$30,000 for certain types of property.

        And the state and federal governments here continue to run up debt while handing out these grants.

        Ridiculous.

  11. Nicko2
    Apr 5, 2017 at 1:31 pm

    Points for Canada, they’re the liberal, globalist, tolerant, progressive beacon in N. America. — very attractive to wealthy immigrants and investors. Oh, the CAD$ has also collapsed over 25% vs. the USD over the past two years, making canuck properties a relative bargain.

    • HB Guy
      Apr 5, 2017 at 1:40 pm

      The bulk of offshore money has come from China, which has tightened its capital controls and other regulations significantly in the past several months. Bargain or not, Asian buyers will diminish appreciably in the months ahead. Add to that the fact that Asian buyers are patient and if they sense a better deal can be had by waiting, they will…

      • akiddy111
        Apr 5, 2017 at 1:59 pm

        “Bargain or not, Asian buyers will diminish appreciably in the months ahead.”

        I think the story is that thy left BC for Toronto. I am not sure what anecdotal observations there are regarding Chinese speculators “cooling” on big west coast cities.

        I will pay close attention.

        • Mike
          Apr 5, 2017 at 8:54 pm

          akiddy, here’s a metric to consider: watch for activity at the gun shops in the Bellevue area by mainland Chinese customers.

          I was in a store recently to pick up an FFL transfer and was chatting with the guys working here, there were about a dozen Chinese in the store at the same time, all from mainland China…. supposedly booming firearm sales to these folks in the last year or two, so much so that they thought about hiring a full time Mandarin speaker to handle those customers… These folks are coming to the US and enjoying a freedom that they do not have in China. ‘more money than sense’, is how one of the guys who worked there described them.

          If the Chinese money dries up, I think that segment of the firearm business will dry up as well.

    • Your Good Friend
      Apr 5, 2017 at 1:43 pm

      ^That explains why Canada is a disaster..

  12. Nick
    Apr 5, 2017 at 1:46 pm

    At the very least, large numbers of people recognise that this is a problem. Here was an article in the Globe and Mail pointing out that the answer to the tulip bubble was not ‘more tulips’ . . .

    http://www.theglobeandmail.com/report-on-business/top-business-stories/bmo-on-toronto-housing-bubble-1637s-answer-wasnt-more-tulips/article34574513/

  13. Shawn
    Apr 5, 2017 at 2:15 pm

    Any C$916,567 for GTA they are nowhere near Vancouver’s C$1.7mil when the bubble was pricked. This bubble has a lot more inflating to go, after all, the Chinese a place to live don’t they? The. US economy is stagnating with stagflation, so it may take a dozen or so interest rate hikes to really prick the GTA housing bubble.

    • Nicko2
      Apr 5, 2017 at 2:58 pm

      Apparently some Chinese are buying in Calgary (which is much cheaper vs. Toronto)….one wonders what they’ll make of the winters. ;)

      • HB Guy
        Apr 5, 2017 at 3:26 pm

        Compared to Vancouver or California, neither Toronto nor Calgary is a bargain when it comes to weather.

      • Apr 5, 2017 at 8:17 pm

        Name one? I know all the realtors in Calgary and Edmonton. None or zero Chinese are buying anywhere in Alberta. The Chinese only buy when something is sky high in price which rules out all of Alberta.

  14. Ishkabibble
    Apr 5, 2017 at 3:03 pm

    The “Canadian” government has a very simple plan to keep the housing bubble well inflated:

    http://news.nationalpost.com/news/canada/chris-alexander-announces-tory-leadership-bid-wants-canada-to-boost-immigration-to-400000-a-year

    How many immigrants into Canada from 2000 to 2015?

    Year……,# of immigrants
    2000…….227,455
    2001…….250,638
    2002…….229,048
    2003…….221,349
    2004…….235,824
    2005…….262,241
    2006…….251,642
    2007…….236,754
    2008…….247,248
    2009…….252,172
    2010…….280,636
    2011…….248,748
    2012…….257,903
    2013…….258,953
    2014…….260,404
    2015…….271,660
    ____________
    Total……3,992,720

    The estimated population of Canada in 2015 was 35,749,600.

    In addition to foreign housing-market speculators, why are Toronto and Vancouver’s housing markets so hot?

    http://en.wikipedia.org/wiki/Immigration_to_Canada

    From the above:

    “Immigrant population growth is concentrated in or near large cities (particularly Vancouver, Toronto, and Montreal). These cities are experiencing increased services demands that accompany strong population growth, causing concern about the capability of infrastructure in those cities to handle the influx.”

    What is “our” Big Business-controlled government’s plan to deal with all of the myriad of problems created by such high immigration?

    Cut corporate taxes, cut government services and cut the number of government employees. Let the “free market” determine everything ……………. EXCEPT the number of immigrants that Big Business wants in order to keep labor costs low and the housing market from collapsing. For that, “We” need a plan!
    http://news.gc.ca/web/article-en.do?nid=851049

    From the above:

    “May 23, 2014 — Toronto — Today, Canada’s Citizenship and Immigration Minister Chris Alexander met with business leaders in Canada’s financial capital to discuss plans for a new immigrant investor pilot program that will make significant investments in Canada and fuel the growth of our economy.

    The government is seeking advice from business leaders across the country on the key elements of a new Immigrant Investor Venture Capital pilot led by Industry Minister James Moore. Today’s meetings in Toronto are the first of a series of stakeholder roundtables that will be held in Halifax, Montreal, Calgary and Vancouver over the coming weeks.

    These roundtables will advance the government’s proposal in Economic Action Plan 2014 to terminate the outdated federal Immigrant Investor Program (IIP) and Federal Entrepreneur (EN) Program, eliminate their longstanding application backlogs, and create new innovative pilot programs that meet Canada’s economic needs.
    ………………….”

    “Free market economy”?! B. S.!

    And, on a perfectly-related topic, how is “Canada” going to reduce its total greenhouse gas emissions and reduce water pollution and reduce its energy consumption and reduce hospital emergency room waiting times, etc. etc. while at the same time Big Business orders its political slaves in Ottawa to INCREASE “Canada’s” population, come heII or high water (or human-race-eradicating high temperature)?

    • Your Good Friend
      Apr 5, 2017 at 3:48 pm

      It didn’t work so well in Vancouver. Prices fell 20% recently.

      • Apr 5, 2017 at 8:09 pm

        A foreigners’ tax wouldn’t have the same effect on Toronto and the GTA that it had on Vancouver. What would tank the market 50 percent or more would be to make the Canadian banks responsible for at least 20 percent of the mortgage risk. Presently they are responsible for none or zero percent. This measure would freeze out almost everyone except people with 50 percent down payments or cash buyers.

        • rob from london
          Apr 5, 2017 at 9:09 pm

          Yes. I believe our banks s**t stinks like everyone else’s but it seems people holding to such heretical views in this country are still merely a statistical rounding error. Oh and if immigration was the ticket to perpetual housing price increases Germany would have the most expensive housing on earth.

          Prediction: The category 5 hurricane generated by the inevitable synchronised collapse of every major stock index on the planet will bring a very painful end to housing bubbles everywhere. I have it on good authority from an old timer I know that following the ’29 stock collapse the price of some housing in Windsor, Ontario fell 90%. He remembers his father buying formerly $5,000 houses for $500. Things are getting sufficiently effed up everywhere you look that a collective and massive underwear staining event is pretty much baked in the cake.

  15. George McDuffee
    Apr 5, 2017 at 5:34 pm

    RE: Under the new budget, property taxes would provide 38% of the revenues, and the land transfer tax 7%, for a total of 45% of the C$10.5 billion in taxes, or C$4.7 billion.
    —–
    Given that the bulk of the wealth/assets of the large majority is their house, this is a defacto wealth levy, although a highly inefficient one in that it omits a levy on the bulk of the assets of the high income/net worth individuals such as artwork, jewelry, collector cars, race horses, etc.

    It is also inequitable in that it taxes the individual on the gross and not net wealth in that they pay the tax on the full value of their house/property and not just the equity they may have accumulated.

    It would seem “just” for Toronto to impose an across the board wealth levy, with a high threshold, perhaps of 20X median annual family income (to compensate for the property tax payment). Just think how much revenue Toronto could generate with even a 1% gross wealth levy on all Toronto residents, no matter where or in what form the wealth is held, even with a high threshold.

  16. Apr 5, 2017 at 5:35 pm

    People forget how hard things crashed in Toronto in 1990-2. Housing prices halved. I think this will be more like 60% when it finally crashes.

    Small houses in my neighbourhood are going for north of $1mil, and this is outside of Toronto proper. The same houses sold for around $350k CAD ten years ago. Rents have gone up a bit, but not enough to call this on fundamentals. A slightly larger (but not outrageous) home around the corner from me sold for $1.7 mil last week; my parents used to own the same floor plan model, and sold it for $500k in 2005. That’s nearly 400% in 12 years! Tiny one bedroom condos are going for $400k or more. This is 20km away from downtown Toronto!

    My next door neighbours just moved in, but then they came from Vancouver, so they were probably able to pay cash. I don’t know anyone else who can afford a mortgage on a $1mil+ home, and my circle of friends are doctors and lawyers. When you factor in cost of living here, I can’t imagine too many people are earning enough to be able to legitimately afford that kind of mortgage. Toronto is pretty expensive. I strongly suspect that a big chunk of this is due to large-scale speculators, not individuals. Forget immigrants, even if we only allow in the cream of the crop, there’s no way they can afford to buy in at these rates. I also suspect at least some of this is due to money laundering. There’s going to be heck to pay when the tide runs out.

    One last thing to consider – in Ontario, all pricing goes through the MLS. There’s no real open discovery of pricing here, although a few startups are trying to break in. The prices reported are what the MLS says they are, and nobody really knows for sure whether they’re accurate. There’s little incentive for realtors to report lower sale prices though.

  17. SPOCK
    Apr 5, 2017 at 6:28 pm

    Wolf – once again your article is on target.

    I live in the Greater Toronto Area (GTA).

    There are a lot of good comments already so I won’t repeat them.

    Essentially, mostly everyone believes that “This time is different”.

    Rather eerily, this Toronto and GTA RE situation reminds me of the 2007 bust in Florida.
    NINJA Loans are everywhere.
    HELOC are obtained by the bucketful.
    People who own 2 or more properties but make less than 30k a year are in abundance.

    I think this market is now at the top and will suffer once an almighty “black swan” arrives.
    That could be anything from the auto industry collapse or, a war starting somewhere. Whatever it is, I don’t know…..but I do feel that “shit” is about to happen!
    Like HB Guy in one of these posts, I lived through the 80s and 90s bust, they were painful. This one will be extremely painful and miserable.

    For those who have warned that this RE market is in a bubble but have been laughed at – just sit back and watch.
    Your moment is here!
    A huge bust despite it pain, is very good for Toronto and the GTA.

    “It is darkest just before the dawn breaks”

    • HB Guy
      Apr 5, 2017 at 6:35 pm

      Yep!

    • Apr 5, 2017 at 8:00 pm

      Whereas NINJA loans were responsible for the housing debacle in America it’s 100 percent different in the Greater Toronto area. The Chinese caused the entire thing. Then the pakis copied the Chinese, then as the market went even higher the fat single white women copied the Chinese. The Chinese create a ponzi in EVERYTHING they touch.

  18. Gershon
    Apr 5, 2017 at 6:30 pm

    Meanwhile Trump, who rode into the White House on a wave of populist anger at the crony capitalist status quo into, has yet to lift a finger to deal with the biggest Swamp Creature of them all, the Creature from Jekyll Island, a.k.a. the Federal Reserve, a.k.a. the oligarchy’s chief instrument of plunder against the 99%. Until genuine populists come to power, purge the “former” Goldmanites whose “No Billionaire Left Behind” monetary policies benefit only a corrupt and venal .1% in the financial sector at the expense of everyone else, and replace them with responsible central banks that act in the national and public interest to facilitate free, honest markets and sound money, these Fed-blown asset bubbles and Ponzi markets will continue to pose a systemic threat to the US and global financial systems.

    https://mises.org/blog/trump-continues-ignore-monetary-policy-—-and-it-will-cost-him

  19. Goshen
    Apr 5, 2017 at 6:33 pm

    Does anyone seriously believe that Yellen the Felon has any intention of acting like a responsible central banker instead of a Wall Street stooge?

    http://www.businessinsider.com/fed-minutes-march-2017-meeting-2017-4

  20. trmist
    Apr 5, 2017 at 6:52 pm

    I have two thing to add,
    1. Three phases to Toronto RE.
    1971 – 1989 18 years appreciation of 800 % .
    1990 – 1996 7 years of decline 28.5% price drop.
    1997 – 2017 20 years appreciation 341% increase and growing
    It took 6 years 1996-2002 for prices to recover to pre correction levels.

    2 A famous ex Tory cabinet minster who goes by the handle The Great Fool has been warning of a house bubble since 2008 the year I bought my house. I know prices cannot increase for ever but if I sat on the side lines for the last eight years I would have never gotten a house. The condo I sold is up about 70% in 8 years. The house has gone up much more. TOR RE is certainly getting it’s moment in the sun.
    I wish I knew the future so I could act accordingly but I don’t and neither do the experts.

    • Your Good Friend
      Apr 5, 2017 at 7:07 pm

      I have my doubts about those numbers.

      Here’s the problem. Current asking prices of resale housing in Toronto are 400% higher than long term trend and triple construction cost(lot, labor materials and profit).

      Do you suppose this is the reason for the massive excess inventory of housing in TOR?

      • trmist
        Apr 5, 2017 at 9:02 pm

        I pulled the average selling price off the TREB web site for each year and made my own summaries. 800% is extreme but in 1971 the average price was $30,426 by 1989 the price was $297,698 all prices CND.

        From what the RE board says there is a shortage not excess inventory.
        I’m not promoting RE or calling for a collapse, just trying to understand the market and make informed decisions.

        Here is a source of raw data if your interested in the monthly reports, http://www.trebhome.com/market_news/market_watch/

        • Mel
          Apr 6, 2017 at 7:50 am

          I’d believe it, because that period includes the 1980’s. Remember them? Crazy decade. Prices for some assets multiplying by 8 is the kind of thing that happened.

        • Your Good Friend
          Apr 6, 2017 at 8:14 am

          With a corresponding plunge.

    • fern
      Apr 5, 2017 at 9:02 pm

      That fool has several properties himself here in the GTA. When i bought my first townhouse back in 1991, it was more expensive to rent it out then to make the mortgage payments, property taxes and condo fees. I surely could not afford to pay 2K per mth to rent out my joint.

  21. Apr 5, 2017 at 7:49 pm

    The Chinese have a knack for destroying cities, in this case the entire GTA. Next on the list of cities to destroy is Seattle, Washington. In another two years we should hear stories about the doubling of Seattle residential real estate prices.

  22. Apr 5, 2017 at 11:00 pm

    Please remember, it would cost $150,000 to buy a home in the US but that same home in Toronto is $1.5 million dollars? Give me a break! https://www.youtube.com/watch?v=JMhdees45O8

    • james wordsworth
      Apr 6, 2017 at 6:27 am

      Seems like a bargain not to have to live in the usa.
      Things are nuts up here, but the one saving grace is we don’t live down there.

  23. Markush
    Apr 6, 2017 at 12:53 am

    “I see no down trend in selling prices in Toronto.”

    Thanks for the accurate observation Wolf! If you haven’t visited Toronto I suggest you do. Hyperconsumerism drives the place and everyone there beiieves the hype of never ending price appreciation.

  24. HighExpectations
    Apr 6, 2017 at 6:39 am

    The Real Tony – I’m honestly not posting here to try and antagonise but I just love a good dose of karma. All around the world Western immigrants have played havoc for decades by going in and buying everything in sight. Nailed down or not. Typically not evenly distributed but rather in specific communities/areas. UK ownership in Costa dels of Spain as a prime example. Germans love a holiday home or two as well and Americans I won’t even get started on, though I must admit they’re better than most at spreading out and not engulfing entire districts. Now I am hearing more and more of the plights of Western people being pushed out of their own native areas by foreign investment. Chinese, Arab, Russian money mainly. Naturally it doesn’t seem fair if you weren’t one of those who benefitted from being the initial problem in other countries, but generally speaking it balances, somewhat overdue actually. Never heard of many/any Canadian immigrants going on a shopping spree in foreign lands so I think they may be holding the bag for other Western countries, but that’s usually the case – sorry Canada, again! :)

    What I find interesting is what they do with the assets. Chinese money (in Med Europe at least) is typically focused on specific districts, monopolising service industries and small retail. Not so great for the existing small businesses but the race to the bottom it starts with pricing I find personally quite useful and the quality of goods is suprisingly decent. They also tend to buy run-down properties and renovate. I find Western money tends to set up shop in tourism/hospitality or high-end real estate which is more of a problem since it nukes the local culture and begins a constant stream of further tourism. Add to this that the Chinese are starting to get really good at learning the local languages which immigrants from other countries often don’t bother with. Having spent a lot of time in Spain I’m constantly amazed these people from the other side of the world learnt Spanish whilst Brits and Americans haven’t, despite the proximity of Spain and Mexico respectively.

    If this mad new global world is set to continue, I’d prefer my new neighbours bothered to learn the local language and actually add to and participate in the local economy/culture. I never understood the image problem with China. Without wanting to turn these comments too political I find the Chinese integrate ok, albeit in dense communities (if this isn’t too much of a contradiction) and whilst China’s internal policies never seem massively freedom loving, they’re not bombing nearly (any?) as many democracies around the globe as we Western powers. Communism – the biggest threat to Democracy, except Democracy, and possibly carbs.

  25. Gershon
    Apr 6, 2017 at 8:51 am

    I’m wondering when Goldman Sachs is going to take out a massive short position against these Ponzi markets, then order their helmet-haired hobbit at the Federal Reserve to jack up interest rates and implode these “markets.”

    http://www.marketwatch.com/story/the-smart-money-is-record-short-in-stocks-and-the-dumb-money-is-record-long-2017-04-05

  26. SymbolikGirl
    Apr 6, 2017 at 9:10 am

    Living in the West-end GTA it has been absolutely breathtaking to watch the insanity develop over the last few years. I am watching friends parents take out enormous interest-only HELOC’s against their homes already inflated values to give to their kids to buy $600,000.00 townhouses an hour and a half drive out from the city core. I suspect there is a lot of shadow lending going on out there as I watch million-dollar properties around me sell to twenty-something couples, the talk of an enormous bubble is everywhere and yet people still keep buying because in their heart-of-hearts they honestly believe that the government ‘won’t allow’ housing prices to go down.

    • Anon
      Apr 6, 2017 at 11:36 am

      SymbolikGirl,

      Well the developers/RE agents/speculators are certainly doing their best to keep prices up. It’s been recently reported that there are 65,000 vacant properties in the Toronto area. https://www.thestar.com/business/2017/03/30/city-province-eye-tax-on-unoccupied-homes.html

      The provincial and local governments have a land transfer tax as somebody else already mentioned earlier. Why wouldn’t the gov’ts want to keep prices up? After all, their gold-plated pensions and other benefits depend on the taxes everybody else has to pay.

  27. Charles Ponzi
    Apr 6, 2017 at 3:57 pm

    The (((psychopaths))) strike again.

  28. Glad 2B Gone
    Apr 6, 2017 at 4:54 pm

    The Pricing bubble keeps driving the price up and up. Likely a blend of catalysts that help drive the pricing increases including foreign buyers, supply/demand imbalances, etc.

    But are there more winners than losers? i.e. Some rough stats for Toronto;
    i) approx 2 million homes in Toronto (based on aged Statscan 2011 census data)
    ii) approx 113 thousand homes sold in Toronto in 2016 (based on TREB data)
    iii) given the above, 2016 annual sales in Toronto were approx 5% of the home stock.

    So, while the price is high for the 5% that bought in 2016, the paper wealth of the other 95% of homeowners that own/didn’t sell has increased significantly their overall paper net wealth as their property value went up.

    For March 2017, the media reports average Toronto pricing went up 33% YTY, from C$688k in 2016 to C$916k in 2017. So for the majority 95% of homeowners their paper wealth is up significant YTY. Obviously if pricing resets lower, their increased paper wealth can disappear as fast as it appeared. But for the moment the majority are likely feeling pretty good based on their paper wealth gains.

    Also, I don’t believe there is a systemic, over-leveraged, black-swan risk event in housing that would hurt all Torontonians. For sure any price drops would impact the more recent buyers, but for the broader 95% of the population they would lose some of the paper wealth gains they made but doesn’t necessarily put them at any risk of forced selling that would cause a negative feedback loop impairing the overall housing market.

    Different story if there was a big negative economic event (huge unemployment increases, dramatic interest rate increases, mega-recession/depression), which would put the broader population at risk. But I don’t think the housing pricing increases alone create the broader risk. i.e. If more homeowners decide to list their homes for sale than demand increases, then likely housing pricing will go down based on supply/demand balances, but no systemic blackswan event as a result.

    • Glad 2B Gone
      Apr 6, 2017 at 5:29 pm

      I should have also added that Canada does not have a MBS structure for mortgages, rather mortgages are held by banks and other grey market financiers, but not the MBS structure that helped cause the run-up and collapse in the US housing market in the past. Thats why Canada did not melt down in the great recession, they weren’t levered up that way.

      • Shawn
        Apr 7, 2017 at 12:49 pm

        Sure whatever, let’s wait and see what happens as MTA’s medium house price approaches 1.5 to 2 million by next year.

        • Glad 2B Gone
          Apr 7, 2017 at 1:05 pm

          Agreed … likely one thing that would happen is there will be a lot more “for-sale” signs that go up at those prices.

          I am already seeing many more “for-sale” signs going up around neighborhoods ..springing up faster than the spring tulip bulbs.

          It is crazy that sales of 12,000 homes in March at ridicules sky-high prices leaves the other over 2 million existing homeowners feeling wealthy.

  29. slynnns
    Apr 7, 2017 at 2:07 pm

    The flip side of the current house owners feeling wealthy is that pretty much everyone else feels exactly that much poorer if they have any aspirations of owning a house or face spiked rental costs, which is just about everyone else in society. I see this for what it is. A transfer of wealth. The investor class including foreign investors/speculators/money launders/criminals/complicit governing leaders are successfully and once again screwing the younger generations out of house ownership and the ability to benefit from living in a stable community. All the money siphons upwards to the land owners and the billionaires. If I sit quietly, I can hear the sucking noise.

    And unlike yachts or race horses, housing is a necessity and proximity to employment a quality of life (and even health) issue.

    I get tired of people wringing their hands over how we dare not “hurt” the newly created paper millionaires and hundred-thousandaire house owners by halting the damaging practice of investors manipulating the housing market the way they do stocks. The stock market has become a casino with prices and movements seemingly unrelated to fundamentals and reason. Do we want a necessity like shelter and scarce city land to be developed and treated this way too?

    • Anon
      Apr 7, 2017 at 5:50 pm

      slynnns,

      Food, water and air will be next, like in Bolivia.

  30. Bill
    Apr 8, 2017 at 8:55 am

    Canada is run by these people. Read about how not to pay the property transfer taxes (see “…property transfer taxes of C$1.78 million…” in the third paragraph).

    Stampede: the inside story of Vancouver’s wildest property deal, gone in 7,200 seconds

    http://www.scmp.com/comment/blogs/article/1937267/stampede-inside-story-vancouvers-wildest-property-deal-gone-7200

  31. homepricetrader
    Apr 12, 2017 at 8:27 am

    There is a market in the US (CME Case Shiller home price futures) where one can observe/bet/hedge on where a home price index will be in 1-5 years. Anyone interested in creating such a product (even if traded OTC) for Canadian home prices?

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