If the Toronto condo market crashes will there will be a domino effect? Toronto Condos sized at 500 sq. ft. and under, prices on the decline – October 17, 2020,

Personally, I don’t think Canadian home prices will crash, and I say this knowing how badly built a lot of Toronto homes are. With that said I do see a massive inevitable condo crash in the future. Have you watched the CBC documentary titled “The Condo Game” as if today’s date that documentary is 6 years old and it gives you a glimpse into the future which is now today’s huge Toronto condo market problem.

The Condo Game | CBC
| The Condo Game examines the forces at play behind the fastest moving condo market in North America – Toronto – and discovers that the glittering glass hides a sea of troubles.

Now, my view has always been that the CMHC should have never been a Federal entity because housing shortages that exist in Canada are due in large part because of CMHC which favors homeownership and rental controls which make developers think twice about building rental housing.

Now, let me be clear that I personally think that the CMHC should be abolished, however, if there was a demand for the CMHC it should have been a provincial initiative, not a Federal one. Canada’s universal health care is delivered provincially for a reason and that reason is that each province has its own unique set of challenges as well as its own culture.

If a developer were to take a step back and look at Canada’s housing situation, financially developers are pushed into building condos and that’s what they’ve been doing, Toronto does not have a housing shortage, it has a stupid government policy problem. If most of the condos built were rental units Toronto’s economy would be 10 times better than it is now, we’d be the envy of the world.

What Canada’s federal government did was they designed a ‘flippers paradise’ a scenario in which it’s a foregone conclusion in most people’s minds that HOUSING prices will go up. Well, some people, unfortunately, haven’t been paying any attention to all of the empty condo units in the GTA.

Condos were empty because of Airbnb, hoarding, and flipping. If you know anything about real estate investors, many will take a loss now for future capital gains later. So a lot of flippers and hoarders never imagined a scenario in which Coronavirus would stunt their income.

Maybe these flippers lost their jobs and their mortgage deferrals are coming due, I won’t get into specifics but you get the point here. What this ultimately equates to is a bailout of epic proportions, because as I’ve been stating for years, the Canadian housing market can not deflate for a prolonged period of time, otherwise it will collapse because only 50% of homes/condos are mortgage-free so if there’s a massive crash in which people owe more to their mortgage than their condo will sell for, that puts the banks at risk of default which obviously leads to higher interest rates.

Now, for me this equates to a lower valued loonie, not an artificially low loonie like what we have now, but a debased loonie in which servicing the debts of Canada’s public sector can’t be paid with TAXES and instead will be paid by the central bank printing money.

If the Federal government needs to print money to service debts, the end result is forced austerity and historically higher interest rates. Now, I don’t know, maybe things are different now, but Canada’s private sector is headed for a world of trouble and the problem in my opinion revolves around CMHC.

New York City as an example has a bloated real estate problem as does California, however, those problems are contained within those States, because the sure the Federal Reserve is involved in mortgage-backed securities, but there isn’t a separate branch of the federal government insuring mortgages in America. Canada differs in that everybody in Canada will pay for a deflationary housing market.

Now, personally what I think will happen is 100-year amortization, or maybe Bank of Canada negative interest rates, the missing piece in all of this however is that Canada’s most prosperous economic sectors are under attack via the Trudeau’s cabinet and therefore unlike Germany, Switzerland, and Japan as an example which all have negative interest rates but robust economies, Canada’s green economy push which is undeveloped and unproven will cause an economic downturn in a negative interest rate environment and what this means is the cost of imports will rise drastically and the value of the loonie will fall.

Furthermore, I’d like to remind the reader that Canada’s private sector shrunk since the coronavirus a lot of the job gains in Canada are coming from Canada’s public sector and Canada’s public sector is paid for by Canada’s private sector. So I hope you can see the domino effect of this Condo problem in Toronto persists!

Tiny condos now the biggest losers in Toronto real estate market shakeup | financialpost.com

Interesting times ahead!