Toronto Real Estate’s Harsh New Reality: Buyer Beware
The well written article by Daniel Tencer regarding the current reality surrounding the Toronto real estate market can be found here:
https://www.huffingtonpost.ca/2018/04/07/toronto-real-estate-new-reality_a_23405449/
Sorry Canada, sorry Ontario I hate to burst your bubble but if the Ontario, the Canadian housing market doesn’t continue rise it will collapse, most of the new home buyers, this includes domestic real estate investor expect prices to rise, they expect rental prices to continue to go up, they do not anticipate any form of deflation.
The entity prepared for deflation are the banks, the big Canadian banks expect a bail out of some sort so they can gain more power over the economy. The banks expect interest rates to rise or amortization at 100 years similar to Japan. This is the play, happening right now and the wild card in all of this is the Bank of Canada. What’s approaching is hyperinflation, or deflation. Now for the first time in history, deflation could be the best thing that could ever happen to the Canadian economy, the problem with deflation are the people in debt.
If let’s say the Bank of Canada is forced to raise interest rates as the world starts to see the truth of the Canadian economy, that the only jobs being created are government jobs? The private sector doesn’t like investing into the government, that’s the reason why socialist countries have such a hard time attracting capital, as this truth starts to manifest itself Canada is going to lose capital and if the BoC doesn’t react to what the market wants what you’re going to start see are industries not only leaving but no equivalent replacing them. This creates an ever growing dependence on imports.
Imports are the real inflation, if your economy is reliant on imports, it’s government has to be run efficiently and needs method to keep dollars flowing in. Well currently that’s real estate, the industry the government has to keep under control because because it’s citizens need a place to live. The play for the government is to turn as many people into home owners as possible so they have more of an excuse when the economy crashes and they bail out the banks.
How this relates to the housing market is the flaws of central planning will start to manifest itself. In Toronto despite the propaganda being spewed majority of the condos being built now aren’t being bought but Canadians homeowners, majority of them are being purchased by real estate investor, real estate speculators, this has been happening in Toronto for years. I’ve attended a few of these meetings and the sales pitch people are not appealing to Canadian families they’re appealing to flippers and real estate investors.
Most Ontarians are purchasing homes and condos with the expectation to flip it for more money in a few years. Most real estate investors are putting pressure on governments to raise rental prices, via things like higher minimum wages. Most real estate investors are already under the water and this was prior to more regulations on the housing market. The disaster is coming and I highly recommend that you read the article I linked to, to see things from another perspective. My perspective comes from being on the ground, I live in Toronto I see this stuff daily, it’s a disaster out there and I genuinely don’t think Ontario doesn’t know how bad this problem is.
