Landlords, Tenants, and Housing – TVO Youtube – Get Rid of the CMHC

If you watch the video below you get varied responses to what’s causing the housing shortages in Ontario

Why I point the blame at the CMHC is because they’re Federal and not only are they Federal but like Canada Post and the CBC they’re a Federal Crown Corporation, which allows them to offer products not available by the private sector at prices that don’t reflect true market fundamental. Furthermore, Canadian taxpayers are on the hook in the event of an economic downturn which has fueled the real estate market in Canada. CMHC is an insurance company that basically protects the banks from losses, now most people assume that CMHC only helps the residential market, but it doesn’t, the CMHC also funds private sector businesses, and my problem with CMHC is that it picks winners and losers, which from a real estate standpoint equates to a condo market that isn’t based on domestic consumer demands.

The problem with Ontario is not condos being built it’s the types of condos being built, the types of condos being built aren’t reflective of the domestic demands of Ontario, the current condo market is based on investor demand and most of the investors in Ontario’s condo market are speculators, they’re flippers, they’re purchasing for cash flow and part the problem this causes is if let’s say a family with 2-6 kids is looking for a place to rent, most of the condos being built aren’t being built to cater to these people, most of the condos being built around Ontario are Bachelor, 1 and 2 bedroom condos, this is the real reason why housing all across the board in Ontario is skyrocketing, even the numbers show that an accurate amount of Condo developments are being built to meet the needs of the people, what the numbers aren’t showing are the types of condos being built, how many bedrooms are in these condos and what types of people are buying these condos.

A speculator, a flipper, a real estate investor etc. isn’t going to have the same priorities to purchase a condo as a person with a family or a person that’s actually going to purchase the condo as a place to live long term. So what you get are lot of are condos in Ontario that nobody wants, which of course leads to a demand in the properties Ontarians actually want.

The real estate person in the video above used an example of people who own pets lying to get into rentals, what you’ll want to ask is why does this happen to begin with? If there wasn’t government intervention, there would be more properties to cater to people with pets, there would also be condos built to cater to people with pets, people don’t understand that it’s the regulations and the government intervention that stops the market from solving problems. the argument from people who prefer Government fixes problems is that it takes the market to long to react, which is not true, the market takes long to react because people ask the government to solve the problem, do you honestly think private profit based entities would turn down the opportunity to make a profit?

Of course not, the problem is the government keeps creating regulations and then while creating regulations trying to solve them too. Government people don’t work for free and the government gets its money from taxpayers and the private sector, which it then decides to pick winners and losers, the winners of CMHC are people who can afford a home, the losers are the people who can’t and provincially there’s little to nothing the government can do about it, because CMHC exists in a low-interest rate environment. Now, if interest rates were high, an argument could be made, but interest rates are historically low and less and less Canadians are qualifying, so why have CMHC in the first place?

Now, if you’re still wondering why I point at CMHC, it’s that they’re Federal which means they supersede any provincial wants or needs as foreign investors can purchase condos before the domestic clients even give their input. Now, allow me to explain foreign real estate investors, foreign real estate investor don’t have to physically be located in China, in fact many of the foreign money being used to purchase condos and homes in Ontario are purchased from the domestic population, when I say foreign investors what I’m referring too are foreign capital, who pose as domestic investors who will give money to their friends, family or business associates who reside in Canada to purchase these homes or condos. So the actual name on the deed isn’t always the actual purchaser, making matters worse is that once these properties are bought there are usually domestic flippers who often purchase these properties in hopes to flip them in a few months or years, which gives the impression that there’s a domestic housing boom when there’s not.

This happens all the time in Toronto, it’s not even a secret, of course, this stuff doesn’t get reported to the government, because who in their right mind is going to report this stuff to the government? If I was involved in it I doubt I would report it. I only know about this stuff because I have accountants that tell me things, I’ve also attended many real estate seminars, which if you attend them will talk about this stuff openly, sure they’ll use different terminology in order to get the audience to buy in, but this stuff is common sense and well, Ontario or I should say Canada as whole is going to have to learn things the hard way.

What’s going to be very interesting in Toronto will be what happens when the crash happens here, because when all of these shoebox condos go on firesale, most people aren’t going to buy them, again what I’m trying to explain to readers is that there’s little to no domestic demand for most of these condos, most of the University kids can’t afford them, the majority of the domestic population won’t even qualify to buy them especially if rates rise or if rates lower(which raises their costs). By the time the crash happens what I’m trying to explain is that the properties that are actually in demand may see no move in their prices. I’ve been calling for stagnation for years now, this has already happened in Japan.

But the properties, not in-demand are going to have exploding mortgages, the U.S Federal Reserve is at a crossroads right now on whether to raise or lower interest rates, what people aren’t understanding is what’s going to happen if the Federal Reserve lowers interest rates, it’s going to lead to a panic, it’s going to lead to a shift in how people invest, it’s going to lead to shifting away from government-controlled assets, as confidence in world governments will go from positive to negative. Crashing currencies is nothing new, it’s happened throughout history, it’s just that most of us have never seen it in our lifetimes, the problem is, that time is ticking it’s drawing nearer and I’ve been telling people for years that current U.S President Donald Trump was tailor-made to deal with economic crashes.

I expect the crash to happen in his second term in office, if a Democrat wins, I do expect another Obama scenario, the problem is that new Democratic President if elected wouldn’t have the business savvy of a Donald Trump and would probably push the U.S in a full-blown socialist direction.

With that said Fed Policy, central bank Policies are different, current Bank of Canada Governor Stephen Poloz has been slow to raise rates in Canada, and everybody knows why, it’s our housing market, can Poloz lower rates in Canada? Sure he can, but you see there’s this thing called hyper-inflation that may hit Canada, real estate is tied to jobs and employment and well Canada has been losing a lot of jobs, Alberta is now a have-not province, GM recently left Ontario, I personally don’t think Doug Fords recent moves to eliminate RentalControlss in Ontario was a smart move, because there again remains no incentive for private developers to build housing for the lower middle class and poor?

There’s currently no incentive for condo developers to build housing for the poor either? CMHC which is federal is the cloud that binds the real estate and rental markets, in a low-interest market what’s the purpose of their existence? Housing prices haven’t gone down since CMHC was created they’ve gone up since the creation of CMHC rental prices haven’t gone done in Ontario they’ve gone up? The longer CMHC exists the longer this problem in Canada will last. It’s time Canada considers getting rid of a lot of these crown corporations!

Interesting times ahead