A perfect example of why unsophisticated real estate buyers and investors in Canada shouldn’t purchasing condos and homes! – April 7, 2018,

Being an owner of land isn’t for everybody, owning a business isn’t for everybody, because a lot of people aren’t experienced with losing money on an investment, their assumption is that investing should mimic their experiences as a consumer. As a retailer customer, you’re usually making a purchase after it’s been polished to perfection when you’re making an investment, there are no guarantees. When you invest in anything, you hope that everything turns out well, but it’s still an investment and there’s a chance of risk. The story below is the perfect example of people who clearly can’t afford the risk of purchasing an inflated condo, that the government of Canada made inflated, by subsidizing the Canadian housing market.

How do you stop developers from cancelling condos? Buyers, lawyers and builders weigh in – CBC

Now, I want you to read the below story and think about it for a moment:

David and Laura Wright put down a $48,650 deposit for a $320,000 condo at 2359 Danforth Rd. They will get a refund on their deposit but not on the $3,000 in interest on the loan they used to put that money down.

This common knowledge in the real estate community, there’s no victim here, if you have to take out a $48,650 loan for your deposit, that’s your fault! If you can’t afford the risk don’t make the purchase. The details are in writing and there was no gun put to your head forcing you to buy. The main reason the condos price tag was $320,000 in what I consider to be a crappy area of Toronto is that the government via CMHC and other laws have created a real estate disaster that’s lacking any fundamental market values. So, prices for housing in Canada’s most in-demand areas aren’t allowed to deflate beyond a certain point. Actually, let me write this differently, housing prices are being incentivized to stay at a certain level in order as to avoid a housing crash.

In a real market prices are based on perceived value, however perceived value can go up and down maybe an area of the city that used to be hip is no longer hip, maybe an area of the city that used to have a lot of jobs no longer has those jobs, these changes in the market can cause housing prices to deflate. Now, in downtown Toronto, the assumption of perceived value forces prices up, so a lot of foreigners in many instances using domestic mules as real estate buyers will not only force condo prices up but also assure that a condo will be built quickly.

When you attempt to purchase condos in areas like Scarborough, East York, Etobicoke and some other areas of the city, which many Torontonians consider not so desirable neighborhoods, it’s harder to attract buyers, primarily because it’s harder to hide empty condos in an area where a lot of people have no desire to live in. Downtown Toronto, near the Eaton Centre, the Skydome, Scotiabank Arena, it’s a lot easier to ide empty unused condos in these areas of the city, because a lot of people frequent these areas, which basically clouds the emptiness of the condos. It’s not until it’s night time that realizes how empty most of the Condos in downtown Toronto are. Furthermore, a downtown condo gives better rental opportunities, especially with students and for Airbnb, etc. Danforth, paying $350K for a condo is basically flushing money down the toilet, those people should actually feel lucky that they’re only out $3000.

Danforth is simply an inconvenient place to live for most people, the benefit is a subway station, after that it’s a mess, it’s basically a 1 lane road, potholes everywhere, businesses aren’t exactly flourishing there, because parking is expensive, it’s one of Toronto’s older parts of the city, there are street cars a lot of petty criminals and it’s really a hit or miss part of the city, it’s a decent drive to get from Danforth to the nearest highway, it’s basically one of those areas in which you’d have to grow up there to appreciate it. I personally avoid going there like the plague. It’s not an area of the city that people aspire to move too! East York and Scarborough, in my opinion, have inflated housing markets and by downtown Toronto’s standards, they look like fantastic deals.

For myself, I wouldn’t pay more than $120,000CAD for a 3 bedroom in East York. A detached house in east york shouldn’t exceed $300,000, if you see most of the houses in East York and observe the demographics, you’d better grasp what I’m talking about. Furthermore, you typically won’t get a lot of land for your house in East York, you’ll be lucky to get a parking spot and it’s hard to maintain the roads in that area. However, Government interference into the Toronto housing market along with unnecessary low-interest rates (The Canadian housing market didn’t crash in 2007-08) has created fake inflation along with attracting investments from shadowy investors.

Now, the people in the article, have nothing to do with the housing disasters, they’re ignorant of what’s happening, but the mere fact that they had to take a loan out for $48,650 as a downpayment and they expect to be protected or they expect people to feel sorry for them because they had to pay $3000 in interest is the deep-rooted problem that’s going to cause the most problems going forward. These types of people don’t seem to understand risk, The government needs to step in and do something they tell themselves, typically what happens in most of these stories where people borrow money for a downpayment is that they’ll spend additional borrowed money on the home they expect to be built because they anticipate their investment is going to pay off and go way up in value. The loan will pay for itself once we get this condo and the price inflates they tell themselves, this is how unsophisticated investors and consumer debtors typically look at the world. Then when things don’t happen as planned, they want to be viewed or looked at as victims.

“(Developers) have to be held accountable. As a consumer I can’t be the one that’s suffering. I’m the small guy on the totem pole. These guys are at the top of the totem pole,” said Rob Paniccia, who is pushing for change after the condo he purchased in the Icona development in Vaughan was cancelled last year.

The unsophisticated home buyers think the Developers are the problem when in fact the government created the problem by subsidizing the housing market. Buying a house or condo comes with risk, buying a new development comes with even more risk, in many instances if a project isn’t completed and your money is returned, the developer is doing you a favor, because a lot of condos especially condos that have problems getting financing do a lot of cutting back when building, that’s why most condos and townhomes are cheaply built. There are tons of horribly built condos in Downtown Toronto, but because there aren’t too many people actually living in these condos, the truth will only come out after the housing market collapses. Furthermore, once you purchase a newly built condo and come to find out that it’s a piece of crap, typically you won’t tell anyone, you’ll simply try to pass the piece of crap condo onto the next purchaser.

Oh Canada, you have no idea the real estate disaster that’s headed our way. Instead of complaining those people should be thankful they dodged a bullet.

Interesting times ahead.