Toronto Housing Collapse Inevitable, Private Lending On The Rise – October 31, 2018,
Well, Canada we can’t blame Trump for this one, it was interesting to watch as Canada via Justin Trudeau begged Donald Trump to keep us in the new NAFTA deal, so much so that now we’re in a worse off position in the USMCA than we were under NAFTA and Trump did this because our negotiators are morons. I had written that what Canada should have done to undermine Trump, was to cut taxes and regulations in the same manner that Trump did, but No Justin Trudeau’s Liberals went tit-for-tat on tariffs and being that Canada was already charging American goods tariffs his move meant nothing, which is why in the end we had to concede to Trump.
While this was happening I said over and over again that the Housing market in Toronto was in serious trouble. The main problem in the Toronto housing market is that they’re building condos that aren’t in demand, so the idiotic condo investors can’t even flip the condos that they’re buying, the other thing that happened was that the new stress test policies put in place meant that fewer people qualify for these overvalued homes, which of course means that more people are turning to Private Lenders.
Now, this is problematic mostly because a large number of people turning to Private lenders aren’t actually real home buyers, the majority of them are real estate investors, and schedule and 2 banks in Canada want nothing to do with these people as interest rates rise. I’ve said this plenty of times, the Canadian housing market is going to be stagnant for a very long time if there’s no collapse. Because the truth is the regulations in place are geared towards Canadians who can afford these overpriced mortgages.
The problem with this bloated housing market aren’t middle-class Canadians, the problem with this housing market is the speculators, the flippers, the real estate investors who purchased their property for cash flow. These morons had a lot of properties built for them that aren’t in demand. If you look for a 3 or 4 bedroom condo in Toronto, you’ll notice how rare of a find that is? Now, what person or what people in their right minds would want to by a bachelor, a 1 or a 2 bedroom condo? Only old retired people buy Condos, condos are for rich people and retired people, most families don’t want condos and if they do they should look like a house. In the 1990’s when the condos built were based on actual residential demand, what you used to get was a lot of beautiful 3 and 4 bedroom condos, that’s not what you have in the Toronto market now.
What’s being built now are AirBnB condos, condos for foreign students, condos for flippers, condos for real estate investors and what’s happened as a result is that rent prices in Toronto have been inflated because most renters in Toronto don’t want 1 bedroom apartments they want at a minimum a 2 bedroom, obviously 3 and 4 bedroom apartments are preferred, but as we all know those condos are harder to build because soundproof walls are expected if you live in a condo that was built for families. Anyway, what you’ll find out reading this article is that there are problems happening in the Toronto real estate market that can’t be fixed by the government.
Canadian Banks were warned when they were bailed out in 2007-2008 and since then they’ve been rather ruthless, making sure they minimize their exposure in the Canadian real estate crash, most Canadian banks are very bullish on the U.S economy and bearish on the Canadian economy. The Canadian economy has been going up and up and up for almost 30 years straight, it’s important to know that you can’t blame leftist for assuming that everything is okay because in their minds they believe that their policies have worked and if it ain’t broke don’t fix it right? This is why for me my investments are geared at patiently waiting for the systemic cracks to start forming.
The truth regarding this hiccup is that the government can remove some of the regulations, like the stress test and other things, but it won’t matter much because what people aren’t understanding is that the people with the mortgages aren’t paying down debt, paying down a mortgage is one thing, but what if you have a line of credit, a credit card, car financing, and other household related expenses like utilities and a job where your wages are stagnant? No offense but that existence with a million dollar mortgage sounds kind of depressing to me.
Interesting times ahead.