Number of GTA land investments at record high amid limited supply of Properties Canadians Actually Want Coldwell Banker Richard Ellis report shows – November 7, 2018,
There are a lot of factors fueling the Canadian housing market, but everybody knows the real reason that there’s a lack of supply in Canada’s hotbed of Toronto is that condo developers are building condos Torontonians don’t want. This doesn’t mean this bachelor, Jr. bedroom and 1 and 2 bedroom condos aren’t being sold, the problem is they’re being purchased by foreigners and real estate investors, many of who are using subprime lenders to get these loans.
In the 1990’s the condos that were built were based on demand, which is why if you go around Toronto in some of older condos you’ll notice that many of them are large and built as if they were built for families, Condos also used to have to made of high quality, because there was an abundant supply. If you’re wondering what changed this relationship, it was CMHC and their taxpayer-backed mortgage-backed securities, what this did was it introduced a new buyer and investor into the marketplace and it created the atmosphere that the housing market in Canada can not crash.
When CMHC was first created no one ever imagined interest rates would be near zero, nobody imagined China would be producing so many millionaires, nobody anticipated that the Canadian dollar will remain so low for so long, nobody imagined subprime lenders would be so plentiful in Canada, nobody imagined that the Toronto Condo boom would happen so Quickly. First thing I want to make clear is that Toronto does have a supply crisis, however, the supply crisis in Toronto is based on Condos being built that are not based on the demands of Torontonians.
The condos being built are being built primarily for speculators, flippers and foreign real estate investors. This is why if you go looking for a Condo in Toronto you’ll notice that there are an abundance of bedroom condos on the market, there’s a pretty large pool of 2 bedroom condos and bachelor, Jr. 1 bedrooms. What you’ll notice is that 3 and 4 bedroom condos are very hard to find. These are the condos buyers want, but if they don’t get them in the development stage they won’t be built and therefore this is what’s causing the demand to outpace supply.
This will all be revealed when interest rates are forced to rise. In America the Democrats have just taken the house, there will be a lot of stagnation in the United States for the next 2 years. However what people haven’t realized is that the U.S Federal Reserve can’t lower interest rates because they’re now selling bonds instead of buying them. Once these bonds don’t get bought, the price for these unbought bonds will have to go up, meaning interest rates will go up in the real market, which is not good for Canada, because there’s only so far the loonie can go before we get hyper-inflation here in Canada.
Number of GTA land investments at record high amid limited supply, CBRE report shows
Most of the big Canadian banks have already minimized their impact for the coming crash as more and more reports of Canadians having to go to subprime lenders to get their mortgage. The day of reckoning for all these bedroom condos is getting nearer with every day, everybody knows these last booms are a result of flippers, flipping properties for a quick profit. There aren’t many legitimate residential transactions happening, what’s happening is the smart money is exiting the market even sometimes at a loss and suckers are being left with trash.
Most of the large Canadian banks don’t care about what the Bank of Canada does, they’re watching the federal reserve and what’s about to happen in the United States is gridlock and because Trump so far spent more money than Obama and also started a few trade wars with other countries, now that the Democrats have the house, Trump is going to have to make concessions on particular issues which will lead to an economic stalemate. With that said the U.S federal reserve already showed it’s hand by selling a whole lot of bonds and because of the bureaucracy that’s about to get bloated in Washington the price for those bonds are about to go up whether people like or not. Canada is in one of the worst economic positions in its history and debt is in Canada is about to be the first casualty.
Interesting times ahead.
