real estate crash

The Market Crash Is Coming…Right?

Opinion

10 minute read

March 29, 2021

I’m pretty sure I’ve written this post before.

In fact, I’m pretty sure I’ve written this post before, while using the words, “I’m pretty sure I’ve written this post before,” before.

If that doesn’t lead you to the conclusion of today’s post, without needing to read further, then I don’t know what will.

Oh, folks.  It pains me to write this.  It really does.

I mean, what’s the definition of insanity, anyways?  I feel like this is the sixth or seventh time I’ve tackled the “market crash” topic, and the result has always been the same.

This time, will it be different?

Is the crash coming?

If the market dropped by 15%, would that be a “crash?”  And would it be enough to satisfy those who have been calling for a crash before the market gained, oh, I dunno, say, 170% since they started?

I got into real estate in July of 2004.  Since that date, I have heard all kinds of talk about a market crash, and the talk has been very strong at certain points.

2008, for one.  The market crashed in the United States, so it seems to reason that we’d talk about it here in Canada.

The early-2010’s for sure.

In 2017, the market actually did crash, momentarily.  But it was like one of those “planned demolitions,” where engineers place explosives in all the right places of a dilapidated building to take it down effectively, and people watch from afar and, for some reason, cheer.  The federal government said that they were going to “take steps to cool the housing market,” and that’s really all it took!  Not the actual steps, but the words uttered, and the market dropped spectacularly overnight.  It recovered in multiple segments here in Toronto by year’s end, although some of the stats took until 2020 to catch up.

Regardless, I have heard “bubble” talk and crash-speak for seventeen years now, and yet it hasn’t happened.

Here’s the GTA average home price since the year before I got into real estate:

You could pick any point on that line, and I guarantee, you’d have found multiple economists, financial analysts, authors, and “experts” who were predicting the market crash.

So what’s it going to be, folks?

Does anybody want to predict that the average home price drops to $500,000?  Is that 45% drop coming?

Does anybody think the crash will be worse?

Remember in 2013 when Nicole Foss suggested that real estate values in Canada would drop, on average, by 90%?

Alright, fine.  You’ve heard that bit from me before.

But given what’s going on in the news right now, I can’t quite help it.

Everywhere I look, I’m reading about the crash.  The bubble.  The chaos that’s going to ensue!

How about some headlines from this past month?

3/4/2021, Toronto Star, “‘By All Objectives Standards It’s A Bubble,’ Even Realtors Say Accelerated Prices Are Worrying”
3/10/2021, Financial Post, “David Rosenberg Says Canada’s Housing Market ‘In A Huge Bubble'”
3/11/2021, BNN Bloomberg, “Bank of Canada On Guard As Bay Street Warns Of Housing Bubble”
3/25/2021, BNN Bloomberg, “Toronto’s Hot Housing Market Raised To ‘High Risk’ By Regulator”
3/25/2021, Global News, “Canada’s Housing Market Is Showing Signs Of Overheating, CMHC Says”
3/26/2021, BlogTO, “Toronto’s Real Estate Market Is So Out Of Control That It’s Now Considered High Risk”

And that’s just the ones I remember reading!

Head to Google and punch in a number of keywords like “bubble” or “crash” and I’m sure you’ll find more.

How about a few leftist opinion pieces?

3/13/2021, NOW Magazine, “Real Estate Agent Says That A Scarborough Bungalow Listed For $2.2M Does Not Indicate A Bubble”
3/18/2021, Vice, “Canada’s Housing Bubble Is Getting Way Worse, And Younge People Are Screwed”
3/26/2021, Better Dwelling, “Canadian Property Bubble Nears Systemic Failure, And Not Even A Big Crash Can Fix It”

Ah, yes, fix.

Fix the problem.

Fix, as in, everybody gets to own a red-brick Georgian centre-hall?

I’ll leave that topic for another day.  I made the mistake of reading an old buddy’s Facebook rant the other day, as well as the accompanying comments from his, um, “like-minded” new group of friends, and I can’t stomach the words “should” as it pertains to housing, the economy, and personal finance anymore…

I don’t recall a time in my career when I have heard more crash-speak, or seen more headlines, than what I’m seeing now.

But what does that mean?  Does it mean anything at all?  Do the loudest voices speak the most truths?  Can I read anything into this?

I was on BNN last week to talk about the market, and in the pre-interview, they referenced David Rosenberg’s comments about the “market bubble.”  I was hoping they’d ask me about this, but they did not.  I wanted to say that, while Mr. Rosenberg is far more intelligent than I am, he, along with many of his colleagues, have been talking about the “froth” atop the market for a decade now.  Some for even longer…

March 17th, 2008.

Does that date ring a bell for any of you?

That was thirteen years ago.

That’s when many people decided that the Canadian real estate bubble was a real thing and that they were going to wait for prices to crash so they could finally get what they wanted

Why did I pick that specific date?

That’s when this book was released:

We haven’t talked much about Garth Turner in the past few years.  I think many of us just gave up on the idea that this guy actually knew, at any point in the last twenty years, anything that would or could happen in any market.

What I wanted to say during my BNN segment was this: the average home price in Toronto in 2008, when Garth Turner released this book about the coming market crash, was $379,080.  The average Toronto home price in 2020 was $929,660.

Not only did the market fail to crash, but it more than doubled by 2016.

I spent a lot of time in the early 2010’s writing about Garth Turner, but he became so irrelevant that I stopped.

What I did not know, however, was that he’s still active!

Did you know that?

Were you aware that Garth Turner is still lecturing his legion of greater fools about the impending market collapse?

I just read one of his blogs, where he’s patting himself on the back for being “right” about mortgage bond yields increasing, but, as with all his writings, fails to mention that his book and his opinions cost a slew of Canadians a lifetime of tax-free capital gains that they’ll never get back.

Here’s a comment that made me sick:

I don’t actually know anybody that’s been waiting a decade for the crash.  These people are like urban legends.

We all assume that there are would-be buyers out there that have really, truly been sitting on the sidelines, waiting for the housing bubble to burst.  But here’s an actual person, commenting on Garth Turner’s blog post, detailing his patience as it pertains to the “bubble burst.”

Can you imagine?

Think about this person, living in Toronto.  Think about the average home price ten years ago, at $431,262.  This year, we’ll probably pass $1,000,000.

Talk, talk, talk.

That’s all I’ve heard in the past seventeen years.

Talk about the crash.  Talk about the bubble.

And the market keeps on moving.

Garth Turner was wrong.  Surely there’s no question about that, and his predictions failed spectacularly.

But do you know what didn’t fail spectacularly?

His book sales:

Garth Turner

This guy is an author.  That’s who he is.  That’s what he is.  He’s an author.

He’s not a clairvoyant.

He’s nowhere near being qualified to give out real estate advice, as we can plainly see.

He’s a guy trying to find listeners, just like anybody else out there trying to make a living with a pen or a voice.

Not unlike this guy:

This book was released on March 21st, 2015.

“Surviving” for some people meant seeing their property values increase by 50%, but I digress…

Over, and over, and over, for the seventeen years I’ve been in the business, I’ve seen media, authors, economists, talking heads, magazines, and newspapers try to call the market crash.

Over, and over, and over, they’ve been wrong.

Here’s another all-time favourite:

“Now What?”

Um, I don’t know.  Maybe hang on to that house because it’s now worth $2,000,000?

Many of you are reading this thinking, “So what?  We’ve heard this from you before.  What’s new?”

The newer readers to TRB are wondering, “How does looking into the past tell me anything about what’s going to happen in the future?”

Those would be fair lines of questioning, and I’ll be the first to admit that I’ve beat this horse to death and beyond over the last decade.  But in the spirit of fairness, is there anything more unfair than “experts” calling for a market crash for a decade, only to continue calling for it in 2021 after prices have more than doubled?

There is no “crash” coming.  It won’t happen.  I’ve been saying this for more than a decade.

Toronto Realty Blog on February 18th, 2008: “Is the Market In Trouble?”

I wrote that thirteen years ago.

Tell me if this sounds familiar:

Pick up a newspaper or business magazine these days, and it seems that every single editorial or opinion piece is predicting a meltdown of the real estate market.

It’s almost as if the media wants this to happen.

I don’t tell them how to write stories, print newspapers, and report on world happenings, so why are they telling the general public about the future of the real estate market?

Thirteen years ago.

I would encourage anybody who feels, in 2021, that we’re “on the verge of a market collapse,” to consider how long thirteen years is, and for how long people have been predicting this crash that never came.

If I were that reader of Garth Turner’s blog who commented that he’s been “sitting on the sidelines for ten years,” I would be laying on the ground in the fetal position right now.  Everybody around that guy has gotten shit-rich from simply buying real estate, and many of those people are far from rocket scientists.  Consider a couple of dummies who bought a condo in 2016 for $400,000, sold it in 2019 for $650,000, and used that $250,000 tax-free capital gain as a down payment on a $1,100,000 house.

Meanwhile, the “smart” people are on the sidelines.  Waiting.

They’re looking at stats, charts, graphs; reading The Economist, talking to their financial advisor from TD, listening to podcasts from experts, attending seminars, and doing everything in their power to avoid buying.

This is a confirmation bias at play, if I’ve ever seen one.

You want the market to crash, so you look for reasons why it could.  Then you convince yourself that these facts are undeniable, and you use the resume of those who share your vision to support their opinions.

How could a lead economist for a Big-5 bank be wrong?

What about UBS?  Those guys are smart, right?  They put out a “Global Bubble Index” every year and Toronto is always listed.

I have a laundry list of these.  Lemme pull one up…………..ah, here, from 2017 – UBS Global Real Estate Bubble Index 2017

.

Alright, so I’ve established that people have been calling for the Toronto market to crash for almost two decades, and I’ve established that there has been no shortage of experts that have called this incorrectly for just as long.  But what about moving forward?

Here it is, and you all want to hear me say this so you can pick it apart: the Toronto real estate market is not going to crash.

Not going to crash.  Not going to drop.  Not going to “correct.”  Oh, there’s a word I hate, since it infers that current prices are incorrect.  Prices have been incorrect for a long, long time…

So why do I think this?  Or how can the market continue to increase?

First and foremost, let me admit that I don’t believe this is “healthy.”  A reader asked this last week, and I was asked this on BNN to which I said, point-blank, “There’s nothing healthy about this.”  But this market not being healthy, and this market crashing, are two different things.  Our definition of “healthy” may change.  Our style of living may too, with a larger percentage of individuals renting versus owning, or commuting, or working from home.  A decade from now, we may look back at “healthy” as a synonym for “ideal,” as we accept the Toronto real estate market for what it is, rather than what we wish it were.

I’m not a market cheerleader.  I’m not in denial.  I’m a realist.  And I see what I have always seen in this market: a massive deficit between supply and demand.

For years, the government has tried to decrease demand.  The CMHC has made a dozen or more major changes to the mortgage industry, since the time when you could purchase a house with 107% financing, to say the least.

What about building infrastructure that could reshape the demand curve?  Is the government building any high-speed rails at the moment that would allow people working in Toronto to live in Niagara Falls and get to work in 30-minutes?

Hmmm…

But what about supply?  What has the government done to increase supply?

Some people out there think that a tax on capital gains is the “cure” to our market woes, but that would do absolutely nothing to decrease demand, increase supply, or help with affordability.

We’re not building on the Greenbelt.  We’re not incentivizing home builders.  We’re not constructing low-income or subsidized housing.  What is the government doing to help with the supply problem?

Point to low interest rates as a reason why demand is high, and I’ll point my finger out right alongside yours.  There’s no question that low interest rates are helping both demand and affordability, but do any among you think we’ll see a 5-year, fixed-rate above 5% in the next five years?

Supply is low and will remain low.

Demand is high and will remain high.

And in those two sentences, I give you my reasoning for why the market is where it is, and why it will stay here.  You don’t need a top economist to write a book on this.  You just need to simplify the analysis and look at the very most basic tenents of what makes a market.

In the end, it’s not my job to convince anybody that the market will go up, down, or sideways.  I’m a real estate broker.  I work with real estate buyers and sellers as an occupation, and I write a blog in part as a hobby and in part as a way to attract clientele.  Whether or not a TRB reader agrees with me or not, is none of my concern.

But I will say this, if I may be so bold, you can call me a biased bull or call me a market cheerleader, but there’s one thing you can’t call me: wrong.

Since that 2008 blog post, I’ve written countless entries lamenting the “bubble” talk, all the while, saying it wouldn’t happen.  In that time, hundreds of notable economists, financial pundits, columnists, banks, and even members of the CMHC have predicted a crash or “correction,” and it’s never happened.

In reading the TRB comments, it seems as though there’s a 60/40 balance of bulls/bears on here, maybe more.  Some of those who are lapping up that “froth at the top” are already in the market, so whether there’s a correction or not, it doesn’t affect them.  But for those of you who are like Garth Turner’s reader and are waiting on the sidelines, it’s not my place to tell you whether to buy or not.  But I will tell you one thing, and it’s an unsolicited piece of advice: if you don’t have a better reason for believing there’s going to be a market correction than “it just has to,” then you have a problem on your hands.

At some point in 2021, we’ll see one, two, or three down months.  The bears will celebrate, and when the TRREB average home price drops 5% in a month, they’ll get on their dancing shoes.  But where will prices be next year, and the year after?

That’s rhetorical.

And if you really need it answered, just read any of the blogs I’ve written dating back to June of 2007…

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

Find Out More About David Read More Posts

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140 Comments

  1. Pingback: Best Real Estate Agent In GTA – The Market Crash Is Coming…………..Right? – Toronto Realty Blog
  2. Bruce K

    at 7:53 am

    Re: Garth Turner.
    It’s always disappointing when a financial advisor gives advice that jeopardizes a clients financial future. I don’t know how many followers Garth really has but hopefully not too many as they would suffer badly following his advice. Even his recommendations regarding CPP and OAS are woefully wrong.

    We need to see the world as it really is and not as we would like it to be.

    1. Jordan

      at 7:25 pm

      He just preaches diversification. Don’t put all your eggs in one basket. Yes, putting it all in RE has been good for a very long time. I made all my money from real estate. But it could have gone the other way. No one really knows until it’s already happened. Hindsight is 20-20.

  3. HVAC Mike

    at 7:53 am

    Only regret I had was not buying few more properties back in the 2010-13 when I could leverage one along to the next one. My old school euro parents saying prices are crazy dont buy more, now they are too high for me to do this.

    1. Jordan

      at 7:12 pm

      This is a joke, right? Regardless of “bubbles,” almost all assets appreciate in value over time. Even f***in’ pokemon cards. The only reason that real estate looks better is because of the ability to leverage your savings by 5-20x AND get a tax-free gain. If you could do the same thing with the S&P500 return, you would be way better off. But no one knows that. The only way any Canadian knows how to “invest” is thru real estate; rental properties, flipping, leveraging, whatever. They are – like the author – financially illiterate.

    2. Jordan

      at 7:15 pm

      Sorry, HVAC Mike. This wasn’t directed at you…. Though you’ve obviously been brain-washed too.

      1. Nadroj

        at 3:34 pm

        Brainwashed? By whom? For what purpose?

  4. Bal

    at 8:02 am

    i understand that crash talk is kinda bothering realtors…..but how can you justify 40% price increase within eight months…don’t you guys think something is wrong ?…what changed in the house market that the prices needed to increase this high? don’t you see sellers who just bought eight or six months ago flipping with 450k profit without doing any upgrades…how is this healthy for the market?

    1. Appraiser

      at 8:35 am

      Yes, there is something is wrong Bal.

      The real estate market needs a gusher of new listings and new construction to quench demand.

      Neither tax nor talk will get it done.

      1. Bal

        at 9:13 am

        but these issues are not new Appraiser….my question is why sudden increase in within last six months….we had same issues in 2018 and 2019…but prices were not this crazy….so is this all due to low interest rates…and fear of missing out?

        1. Jay

          at 10:30 am

          All the millenials putting off pregnancies or living with a baby in a one-bed rental, trying to squeeze a few more years out of the downtown TO lifestyle, suddenly realized that the city would be shut down for a long, indeterminate period and decided to move their home buying plans (often in the suburbs) up in schedule. Boomer parents, seeing where the market was headed, and with interest rates at an all time low, pulled out equity to help. Savings grew quickly with no vacations, concerts, restaurants or bars to attend. Condo owners sitting on gains traded up for detached SFH, desperate for space. WFH meant people could spread out, pushing up prices in the surrounding areas. As the month-to-month gains threatened to price people out, more and more buyers emerged, fearing missing their last shot at home ownership. Then, the people who couldn’t get into a SFH, realizing condos were the only thing available at their price point, returned to that market. The vaccines arrived and skyscrapers seemed livable again. In short, a wave an entire generation of buyers got into the market at the same time as established owners were trading in equity, at a time when savings blossomed and debt was cheap. No mystery.

          1. Ed

            at 12:56 pm

            You make a lot of good points.

          2. Christopher

            at 9:36 pm

            Excellent summary. Also BofC governor said go out and get a mortgage, rates will be cheap for years. It’s not just low rates today, it’s the line of thinking that the government has your back and will come to the rescue should things turn south in the future.

        2. sandip

          at 6:46 pm

          I will tell you Bal
          Real estate become major economy indicator for canada.
          In pandamic, when march 2020, when things went slow and all industries starting on hold including real estate.. Government thought we can’t keep other industry afloat in padamic, how about Real estate ? that is the industry we can leverage and can give good GDP indicator.. that is what they have done.

          What government has done, using bank and big real estate brokerage it self..sets the director to increase real estate transaciton this year so that GDP on Book remains healthy.. for that , real estate agents was beign used as front runner.. and they started to increaseing the prices..

          what execuses was giving , big migration from toronto to suburn , low interest rate..

          if goverment wanted then they can make sure interest on mortgate loan did not drop same like car loan.. but they did not..

    2. Tony

      at 10:44 pm

      Bal, IMO the one point that I never see real estate market observers comment on in their analysis is the current cost to build.

      If you talk to any home builder, the cost to build has also skyrocketed over the past several years. This can be attributed to a number of factors; cost of lumber as gone up significantly due to trade relations with the U.S., cost of labor has skyrocketed largely due to lack of supply of workers, etc, to name a few.

      This increased cost to build is having an impact on the already short supply of houses. If the market ends up “dropping”, builders will stop building since the margins wont be there. This in turn would then prop up the market again as supply would be further reduced.

      So to answer your question, one may argue you can justify a 40% increase in the last 8 months considering the cost to build has kept pace.

  5. Appraiser

    at 9:05 am

    It was written many years ago that due to the sheer size of the baby-boomer age cohort, the current home-buying-aged generation (the baby boomlet) would see the greatest transfer of wealth from their parents in modern history.

    The leading edge of the baby boomers (birth years 1946-1966) turns 75 this year. Many boomers (self-included), decided not to wait until death to leave an inheritance, but rather to bequeath some family wealth to the children while they were still young.

    This has resulted in many parents helping their children buy houses. This phenomenon has also contributed to increased demand in the real estate market.

    However, it should not be a surprise. It was foretold many years ago.

    1. Bal

      at 9:19 am

      and you are saying it is not due to low interest rates and speculators? lol

      1. Appraiser

        at 12:06 pm

        There are many factors.

        1. Daniel

          at 7:39 pm

          I definitely agree that the baby boomer wealth transfer is leading to an increase in prices. Not just foreign demand for RE, that’s only one part. My problem is that prices have inflated quite quickly thanks to this wealth resource. No longer are people paying a fair value, but rather they put in every dollar they have to purchase a property. And thanks to bank of mom and dad, that’s a pretty big resource to pull from. Blind bidding and FOMO doesn’t help. Same with incentivized realtors to make a sale. Normally this wouldn’t have as big an effect with an increased supply of sellers coming to the market to net a great price… but real estate is not very liquid. People aren’t interested in selling their homes despite any price increase, nor are we building enough houses. People aren’t interested in renting. This asset inflation could happen for some time.

          The confusing thing to me is seeing condo prices increasing dramatically this year with rental rates down 20-30%. I would’ve expected more investors to sell their units, or less investors looking to jump in.

  6. Kyle

    at 9:33 am

    I’m sure i’m not the only one, who at one point or another wished that they could muster an iota of the confidence of a RE bear. Oh to be someone for whom the closest they’ll ever come to transacting real estate in Toronto might be buying a doll house at Toys R Us, or a dog house at Pet Valu. Oh to be able to be dead wrong for half a decade or longer, but still have the confidence to argue the same wrong position, using whatever they’ve dredged up from their echo chambers and bearospheres. Man if only they could bottle that stuff.

    1. Bal

      at 10:43 am

      market didn’t crash due to the low interest rates….we all know that…2017 and 2018 market went down bcz interest rates started moving higher….house prices went insane again once interest rates were cut to near zero and Fed made the announcement that no interest rate increase until 2023…i don’t care what all say…end game is only and only interest rates…

      1. Kyle

        at 10:51 am

        Interest rates are a factor, but not as much as you seem to think. People need to qualify at the stress test levels, so it doesn’t lower the bar to new entrants. It only tips the preference of those who could already afford to buy.

        1. Numberco

          at 11:04 am

          Also, 2017 had the FBT tax which had effects that lingered into 2018.

          There is never one factor that goes into real estate pricing.

      2. Joel

        at 4:46 pm

        I am a mortgage broker and most people base their buying off of what they qualify for, not what their payment will be.
        The stress test hasn’t dropped much (less than half a percent) since its height. So, the interest rates don’t have that big of an impact.

  7. WestEnder

    at 9:34 am

    Wow, David really took ol’ Garth out to the woodshed. Why does it feel like he’s been waiting for this day to come?

  8. Chris

    at 9:40 am

    This should be a fun comment section!

    So, David, do you take a similar opinion towards the stock market then?

    People have been whinging about a pending crash non-stop since the last big crash, and we even had a short-lived crash right around this time last year. If interest rates remain low, it will help keep equity valuations sky high. And with so many governments around the world providing fiscal support, there’s a seemingly endless supply of cash; Deutsche Bank estimates that about $200 billion of the latest round of stimulus cheques flowed right from the US treasury through recipients into equities.

    Do we also believe that equity markets will not crash, drop or correct? As Irving Fisher put it, have both real estate and stock prices “reached what looks like a permanently high plateau”?

    1. Professional Shanker

      at 6:28 pm

      Tell that to high leverage growth plays, down 40% off the highs….

      1. Chris

        at 7:20 pm

        Referring to the margin calls that cost some hedge funds big? Can’t say I followed the story all that closely.

        I’m not in the camp that thinks stock markets are bulletproof. I’m quite surprised they’ve done as well over the past 12 months as they have, and I certainly won’t be shocked if we see another big dip.

        But equally, I don’t think real estate is now immune from decline, and feel David is being naive by proclaiming there will be no crash, drop or correction.

        Especially when many of the talking points trotted out in this article could apply to stock markets – yet we would rightly ridicule anyone who postulated that the days of the S&P500 dropping are behind us.

  9. Bertie Wooster

    at 10:04 am

    I think Turner has become a little more nuanced on the real estate market. I read his columns for fun and his typical argument against real estate is that most Canadians have too much of their net worth tied up in this single asset class, which is a valid point. I actually decided to buy my first house in Toronto after reading a Turner column where he said that Toronto real estate would probably never crash because the transportation system was so bad.

    1. Libertarian

      at 2:42 pm

      I agree. Turner’s “advice” on Toronto real estate has changed a lot since he wrote that book in 2008.

      And he definitely has not told anyone to stay on the sideline to wait for a crash.

    2. Thomas

      at 10:17 pm

      I wonder what Jeeves would say about Toronto RE

  10. Marty

    at 10:11 am

    Best line:

    But it was like one of those “planned demolitions,” where engineers place explosives in all the right places of a dilapidated building to take it down effectively, and people watch from afar and, for some reason, cheer.

    the people could be cheering for:

    1. “Good riddance”
    2. the demolition experts that got it right, first time
    3. just generally for explosions/special effects
    4. other

  11. EastYorker

    at 10:19 am

    So what if the market crashes. As long as the selling amount is higher then the purchase you’re making money. Market goes up 25% then crashes 10 % you’re still making money.
    Other financial advisors say don’t look at your investments on a daily basis but think long term, time in the market.

    1. Average Joe

      at 11:15 am

      You referenced The Economist, but didn’t mention they detailed the true problems January of last year in a housing themed issue called “The Horrible Housing Blunder”. Reading the articles you’d think they were zeroing in on Toronto, but it turns out the dynamic is the same in almost all Anglo countries. Who knew London zoned a greenbelt in the 1960’s and suffered just as much from NIMBYism?

      You’ve pitched an expensive high-speed rail system and building more sprawl while ignoring the two biggest problems: yellow-belt densification and freehold investors. Fixing the yellowbelt is far faster and more efficient than sprawling out to eternity. And freehold investors are using a huge amount of leverage to bid against owner-occupiers because they can effectively finance 100% of the new property by using a HELOC or refinancing. Either of those options are just borrowing against your current property for a down-payment which is why Canadians are among the world’s most indebted. The only way to get value out of your house is to sell it – everything else is just a cheap loan.

      1. Condodweller

        at 1:22 pm

        “The only way to get value out of your house is to sell it – everything else is just a cheap loan.”

        There’s nothing wrong with a cheap loan to finance an appreciating asset that pays for itself.

    2. Average Joe

      at 11:19 am

      This wasn’t meant to be directed at you @EastYorker. Technical difficulties…

  12. Shahbuddin Nowrozi

    at 10:44 am

    Casha traps…

  13. Numberco

    at 11:00 am

    David, where do politics play in your forecast/view? Does the long-term supply vs demand deficiency override politics? I guess you partially answered the question re tax. FWIW, your thinking is similar to mine. Certain politicians will stop short of nothing to get re-elected.

    This is an interesting blog. I wouldn’t say never crash, but there are a lot of other factors at work. Take immigration. The target is to bring over some 350k-400k people in a year (excluding Cdns who return from HK), and they are likely to settle in either Toronto or Vancouver. They come from places where wages are higher (especially when compared vs weak CAD) and real estate prices are higher. They come here because health care is “free” and there is a tremendous social safety net. Yet these “free things” are what may price Canadians out of their own real estate (and likely those who need to depend on these “free things”). Talk about moronic policies.

    Without fixing our long term wage levels and productivity, many home grown Canadians will get outbid going forward.

    As for those who haven’t bought but could have done so, whether because of Garth or otherwise, they can only blame themselves. If the market had crashed, they would not hesitate to pat themselves in the back and said “I told you so”. Adults need to make their own decision, not blame someone like Garth (though I am not a fan of his).

    The bottom line is that real estate ownership is a hedge against inflation. Anyone is free to place that hedge or go unhedged… but just don’t act like a cry baby if one could have hedged but decided not to.

    1. Bal

      at 11:18 am

      Cry baby? lol…why not…i failed to understand the logic behind 40% increase within last eight months…….so is this increase only due to the interest rates ? and Guarantee from the fed that interest rates will stay low until 2023 and further….otherwise i don’t see anything else behind this increase…i will stop crying if someone make me understand this increase…lol….

      1. Sirgruper

        at 1:35 pm

        Bal

        There are 50 different answers and its not just a Toronto thing or a Canada thing. The system is built in for prices to rise. Inflation never stops and money loses its value every day. Land close to the city is limited and rises in value. Government charges and requirements increase every year and increase costs. Construction trade costs are rising drastically as are materials and push up prices. Yes, historically low interest rates and low returns on interest bearing investments and dividends making housing investments a go to alternative. Further if you are well off and have a spare Million or two to invest (many Toronto boomer do), why wouldn’t you buy a condo or starter house for your kids when they turn 18? Its a tax free investment if they use it and if not you’ve started a probate free asset transfer and tax planning for the future. Most importantly, if you think prices will be higher tomorrow, people buy and this is the psychology of the day. Likewise, if you truly see prices falling and you know you can buy cheaper tomorrow, you wait and prices fall. Don’t under-estimate mass psychology in any market. This is not to say you can’t have a bubble and a deep correction like 1989-1994. At that time, a secretary in my office bought 6 spec condo’s and my barber was speculating etc. People were flipping properties sight unseen. When everyone who shouldn’t be buying and with no safety net is buying, then its the time to get out. I don’t think we are there. That said, anyone who knows the future is simply overconfident or selling something.

        1. Bal

          at 7:07 pm

          Nicely explained. Thank you!

      2. Kyle

        at 2:59 pm

        @Bal

        Calgary has the same interest rates as Toronto, yet their RE prices are still at the same level as they were in 2007. So clearly it isn’t only interest rates at play. If you want to understand Jay has identified a lot of the factors driving the run up.

        1. Dill

          at 10:35 am

          Most definitely Kyle. I spoke to a couple of new neighbours who purchased properties in my street and they are all foreign. It’s not Canadian money buying these properties, its foreign. People coming into Canada need places to live.

    2. David (not the David who runs this website)

      at 1:54 pm

      Numberco, you hit it on the head when you mentioned ” The target is to bring over some 350k-400k people in a year …”. That’s the reason why there will never be a real estate crash in Toronto or Vancouver. The government doesn’t care if Canadians can’t afford to live anywhere, they just want to bring more and more people here to keep prices high and wages low. I’m sure the City of Toronto or Vancouver is more than happy to see property values increase, it means greater property tax revenue for them.

      Fixing productivity and wage levels is going to be hard. Canadian businesses don’t really reward hard work and innovation. Where I work, my co-workers and I used to put in lots of overtime and hard work, but it never amounted to any wage increases.
      Some of my co-workers left for other jobs only to find that it was the same elsewhere. I’ve dialed back my work and I still get the same performance reviews, it makes no difference at all. Also, if you do get any raises, you lose a good part of them to the tax man, so most of your hard work is for nothing.

      Building more homes, and government regulation and taxation is not going to fix this problem. It’s obvious that mass immigration has to stop but we’re not allowed to even question that, never mind change it. As long as we have the status quo in Canadian politics, we’re stuck with this idiotic idea that Canada must absolutely import 400k people a year or perish.

  14. JDF

    at 11:39 am

    We live in Toronto and have purchased real estate reguarly since 2011 – own about 4 properties including the one we live in. We have a combination of long term rentals and vacation homes.

    It’s always an interesting conversation with friends and family when they tell us how lucky we are because we bought property over the years. I always tell them – it’s not luck, nor is it science – it’s a decision. Plain and simple. All you have to do is to decide while factoring in the contraints of your respective financial picture. Constraints is the primary factor but the most people are stuck on risk tolerance (and generally it’s very low). I don’t factor in appreciation – my number one factor is whether I can afford the payments – whether the market crashes or not is irrelevant – it doesn’t change what I owe the bank and only changes my payments once every 5 years.

    Even though the market has climbed significantly – my lifestyle is still the same. I have unrealized gains on assets on my balance sheet – that’s for sure. However, they are still unrealized gains…..which mean nothing until they are crystalized. I don’t plan on making that decision (not luck or science) for a very long time…..so when that time comes…..I can look back and conclude whether real estate was a good or bad decision after all.

    1. Appraiser

      at 12:11 pm

      I’m 10 years ahead of you. Trust me, it was a good decision.

    2. Condodweller

      at 12:23 pm

      @JDF This is 100% correct. I went through the same process. Even my family tells me that I was lucky to have bought when I did. I keep saying no, I looked around me, weighed the facts, and made the definite decision to buy. I even had people call me crazy. I actually had opportunities to buy more but decided against it due to increasing prices and personal situation.

      Yes, most people overestimate risk and don’t take enough ironically but that statement is easier to make with hindsight than looking forward.

    3. Mike

      at 4:52 am

      Sorry you’re wrong, but it is luck. How are people who are 17 years old suppose to buy a house in 2011, especially if they don’t come from a wealthy family – or a family that owned a decent enough house to help leverage their kids into the market? Now they are 28, went to school, did everything right in life, finally have a career and a significant other, and at a stage in their life that they can finally purchase a home – but they can’t. Housing price have double since then, has the average family income double? Not even close.

      It may have been a “decision” for you, but or a lot of us it’s depression because we don’t even have a fair “decision” to make.

      Quit our careers to relocate?
      Rent a tiny condo for the rest of our lives?
      Live with our family?
      Never have kids?
      Never marry?
      Keep saving money for a larger down payment while housing prices run away from us and increase 10-40% YOY?
      Oh, or there’s “Buy an absolute dump 200km away from work at your absolute max budget”

      Please let me know which decision we should make.

      1. Tony

        at 10:35 pm

        People in Canada have become accustomed to home ownership being a “right”.

        Unfortunately, the reality is that home ownership is not a right but is a privilege. That has been the case for those living in many major cities around the world and is only now being experienced in Canada.

        Talk to someone growing up in London, New York, Paris, Hong Kong, etc, and they will have little sympathy for a 28 year old in Canada not being able to buy a home.

  15. JL

    at 11:48 am

    I always thought the interesting related question to ask is, if it is essentially never going down, then how much higher is it going to go? (particularly at this pace) That is, if we accept its not overpriced (because there is demand to buy at these prices), at what point do buyers get priced out and prices level off? Interest rates can’t go that much lower, so the drop to near 0 over the last decade has already squeezed whatever extra affordability it could out of the buying public. Wage growth and the addition of second incomes has long stopped supporting price increases. Are we essentially locked in an inter-generational wealth transfer phase at this point, with those without that benefit permanently locked out? The market may never go down, as David suggests, but at some point (and in the absence of wage growth or some other factor) there has to be an upper limit at which point the (beyond-inflationary) price increases level off.

    1. WZ

      at 12:02 pm

      Agreed that this is the far more interesting question, especially for a Toronto realty blog.

      Example: A couple making $200,000 – at $500k they can buy. At $1M they can buy. Even at $1.5 they can still buy, especially if they were already on the ladder (e.g., a condo) or get an inheritance/family help. At $2M they need a lot of family help. And at $2.5M there’s just no world where they can buy / qualify for a mortgage. So there is a cap to growth. Would be interesting to estimate where that cap is.

      I do think this matters less for most of Canada, where prices still have considerable room to grow.

    2. B.

      at 9:19 pm

      I think there’s something to unpack in your “beyond-inflationary” caveat in brackets… There’s a school of thought that the focus in the current environment is, to use the cliche, “return of capital as opposed to return on capital”. Real estate is just one of many other inflation hedges that investors are putting their money in to preserve capital, because some believe that inflation is way above, or expected to be way above, the stated 2%.

  16. Condodweller

    at 12:02 pm

    I keep seeing supply and demand used as the cause of our housing price increases. It is such a deceptively simple statement to hang your hat on yet it is so much more complex.

    I think it’s the supply of money that is ultimately going to determine prices. While I have been saying for years now that interest rates and jobs are key determinants with interest rates being more important as there seem to be enough high paying jobs to qualify for the ever higher mortgages required to buy now, but over the years I learned that the bank of mom and dad was a new supply.

    Add to this dramatically lower interest rates and we have an explanation for why prices are so high. Ok, but what now? It occurred to me that we have a vicious circle happening. As house prices increase, so does the available equity available for mom and dad to transfer.

    Add to this immigrants with cash hordes, when it resumes, and it seems the sky is truly the limit for prices. The article I linked on Friday’s post about the 300,000 Canadian passport holders in Hong Kong ready to flee as the Chinese government tightens its grip seems like a solid supply and that’s only one country or a fraction of a country. It’s actually scary to think that they could be buying for cash at these prices, but just think of how much they can afford if they start using that as a down payment.

    1. Chris

      at 12:23 pm

      “The article I linked on Friday’s post about the 300,000 Canadian passport holders in Hong Kong ready to flee as the Chinese government tightens its grip seems like a solid supply”

      I suspect much will depend on how things in China and Hong Kong progress, but so far, this isn’t looking like much of a factor.

      Take the UK’s statistics as a proxy; they are providing British National Overseas (BNO) passport holders, their dependents, and their 18-23 year old children with the ability to live and work in the UK, and apply for full British citizenship after only one year of doing so.

      They estimate that 5.4 million Hong Kong residents are eligible for this scheme. They expected about 300,000 would take them up on the offer over five years. Yet, between July 2020 and January 2021, only 7,000 have actually done so.

      Granted, the UK is dealing with some fallout from Brexit. But if only 0.13% of those eligible have fled HK to Britain so far, I’m not sure why we would expect the emigration rate of the 300,000 Canadian passport holders to be drastically higher?

      1. Condodweller

        at 12:37 pm

        “Granted, the UK is dealing with some fallout from Brexit. But if only 0.13% of those eligible have fled HK to Britain so far, I’m not sure why we would expect the emigration rate of the 300,000 Canadian passport holders to be drastically higher?”

        Note that people with a net worth of investible assets of over a million tend to be well-educated intelligent people. They plan ahead. I expect things will get worse in Hong Kong which will prompt people to leave over time. To appreciate how much ahead they plan just look at the article. They applied for Canadian citizenship prior to 1997 and even lived here for a while before heading back.

        The flip side of that coin of 0.13% is that there is another 99.87 left…

        1. Chris

          at 1:48 pm

          Maybe things will get worse in Hong Kong, maybe they won’t. People have been forecasting the implosion of Chinese Communist Party for decades.

          You say that high net worth people tend to be intelligent and plan ahead.

          And yet, in that same article, it discusses how there was a net inflow of $1.9 trillion USD to Hong Kong. If these wealthy intelligent people are also planning ahead, it would seem they’re much more optimistic about the territory’s prospects.

          1. Condodweller

            at 2:55 pm

            I’m not going to reread the article but I don’t recall where that money comes from and how many people it represents. I’m guessing a lot, if not most of it is from mainland China, but some could be from surrounding Asian countries with Hong Kong being an internacional money centre.

            I’m not that familiar with internal Chinese issues but from what is have heard there’s lots of Chinese money coming as well. Perhaps you can think of those inflows as future outflows?

          2. Chris

            at 3:11 pm

            I would assume much of it is from mainland China, but have to imagine some is from further afield as well.

            And if the CCP is able to maintain stability in Hong Kong and retain its status as a global financial hub and attractive place to do business and invest, there’s no reason we would expect those inflows to turn into outflows to Canada anymore than we’d expect capital inflows to New York City, London, or Tokyo to do so.

      2. Azalea

        at 1:14 pm

        Chris, I lived in White Rock, B.C. in 1980-81. Rented a house with 4 others for $750/mo with a bay/ocean view. The house had been bought by a real estate agent in November ’80 for $30K. In Sept ’81 I decided to move back to GTA. Owner of home asked me to stay and buy her house for $80K. I declined, moved to GTA and house was sold in October for $90K.
        The money pouring in from Hong Kong and Taiwan, the cash flood, had started in earnest in 1980-81. You probably know the rest of this story, but for those who don’t, it is fair to say that local Vancouverites wishing to buy in Vancouver moved to the burbs because they couldn’t afford to buy in their own city.
        Wanna know what the house I rented in White Rock would sell for today? You’d be lucky to get it for $2.8M. But, as JDF states, and Appraiser agrees, luck has nothing to do with the buying and selling of real estate.
        In a global economy, money moves out of one country and into another at a steady pace. Throw a deadly, and long-lasting worldwide pandemic into the mix and house prices, particularly single family detached, rise…and rise, and rise. Many, many Torontonians longing for a detached home have been buying from Niagara Falls to Lake Huron to up north.
        Just like White Rock, and Vancouver, and Surrey and the Islands back in the 80’s, the money – from inheritances, Mum and Dad, Europe, India, HK, China etc.. – isn’t gonna stop anytime soon. And, Bal, this money does not care about low interest rates; this money buys real estate.

        1. Chris

          at 1:56 pm

          Azalea, appreciate the perspective, but I was more-so discussing migration of people with Condodweller, rather than of capital.

          And while you say “this money buys real estate”, the reality is most of this mobile capital invests in many different asset classes. For example, retail stock market investors are a massive cohort in China.

          And as we’ve seen over the past year, throw a deadly, and long-lasting worldwide pandemic into the mix and equity markets rise…and rise, and rise.

        2. Condodweller

          at 5:08 pm

          @Azaela “luck has nothing to do with the buying and selling of real estate.”

          While I agree with JDF I disagree that luck had nothing to do with it. I was incredibly lucky to be in a position to buy my first condo shortly after school at the most opportune time (best house price+interest mix in my lifetime). I was smart enough to recognize the situation and be able to act on it and lucky enough to have it happen at that specific time in my life. I also benefitted from another occurrence at the time which I’m not going to say as it will definitely out me, to the people who know me at least.

          To me, it was such a no-brainer that I wanted to buy an investment property as well at the same time. Though to be fair, since values were still going down and builders were begging for buyers, many did not believe at the time that it was a great opportunity until it became clear later.

          1. JDF

            at 5:36 pm

            I still believe luck doesn’t have anything to do with buying and selling real estate. I believe you make a commitment and stick with it. My best advice to others is – just do it. This applies in any market. Take a position. I have given that advice to everyone for 10 years. And remember when you buy – it’s always at market value (high) at the time and you will know next year or in 10 years whether that was a good decision or not. I look forward to David’s future blog post showing the average home price chart for 2021 – 2031 !

          2. Condodweller

            at 12:00 am

            It’s hard to make a commitment when you can’t afford it. Had the market not crashed and continued to go down for the next few years just as I was leaving school I would have had to wait a bunch of years and who knows if I ever would have been able afford a place. I put that down to luck.

        3. Bal

          at 7:19 pm

          🙁

  17. Pragma

    at 12:59 pm

    The “smart people on the sidelines” comment is kind of non-sensical. I don’t think anyone who had to buy a home has been waiting on the “sidelines” for a crash. When you buy a home is completely a function of your station in life – when you were born, when you got married, when you had kids, etc…

    Prices have been driven by affordability. I pointed our earlier that that the average mortgage payment is up about 20% over the last ten years in Ontario, nowhere close to the rise in prices. Homes are still affordable, and so prices can hold. The question becomes do prices keep going higher. I’m of the view that interest rates area headed higher and that so is inflation. That monetary policy is giving way to fiscal policy. I think the tailwind of lower rates/affordability has come to end and now becomes a headwind. I don’t know how anyone can declare that 5% is not possible within 5 years. I don’t think it’ll happen but it is within the realm of possibility. But even conservatively, if we get back to 3%, that’s about $200k off a million dollar house while maintaining affordability.

  18. Appraiser

    at 1:44 pm

    “Ontario’s population grew by over a million people in 5 years. Over 800,000 of that was through international students, visa workers and immigrants.

    The fact that they’d want and need somewhere to live in the province seems to not have occurred to a whole lot of people.” ~ Mike P. Moffat, Ivey Business School
    https://twitter.com/MikePMoffatt

    1. Chris

      at 2:04 pm

      “Thanks for the research you have done on population growth and home prices. Do you see prices dropping as immigration slows due to covid? And any comparison with the 1989 Toronto bubble? The population surge leading up to it was similar.”

      “It really does depend on whether or not the international students and visa workers come back. If they don’t, yeah, this could look like 1989 all over again.” – Mike P. Moffat, Ivey Business School

      https://twitter.com/MikePMoffatt/status/1376203828165554177

  19. Jimbo

    at 2:30 pm

    Some people out there think that a tax on capital gains is the “cure” to our market woes, but that would do absolutely nothing to decrease demand, increase supply, or help with affordability.

    The government knows the above to be the case, they need another revenue source because Canadians couldn’t afford to live through a pandemic on their own.

    I say, screw capital gains and just place a selling tax of 5% payable by seller. This gets rid of tax write offs and who cares if someone makes our loses money on their home. Secondly, just introduce a federal property tax at 3% of a houses purchase price due annually. Then lower the marginal rate by 7-9%.

    The second policy will fix the cost of housing and raise government funding. The first will just give the government additional funding to pay the debt they took to keep Canadians solvent.

    1. Condodweller

      at 4:34 pm

      Why doesn’t the federal government just confiscate all homes now and be done with it? That will definitely take care of demand lol. Are you from Cuba?

      1. Jimbo

        at 7:12 am

        No, full blooded Canadian. I do understand that when a government adds a tax it doesn’t take away from another. I also understand that once a tax is added it will not go away. That being said, having a federal tax on property value and less tax on income would be a decent strategy. I should have said lower the average tax rate by 7-9% by lowering each marginal rate by the same.

        1. If you bought over 10 years ago, you would be fine.
        2. If you bought in the last 5 years, maybe this would burn you a little bit, but if you can afford a $1m-$2m home you can most likely afford $30k in tax a year. That is only $2,500 a month.
        a. Maybe the government lets you utilise unused equity for a portion each year and you pay what you accumulated on the sale at a later date .
        3. Anyone that can’t afford their house can sell and the person that buys can factor in the tax before making a offer on price. If you can’t fetch the price you need to walk away then see 2a.
        4. If you own multiple properties you can increase the rent, if increasing the rent $2,500 a month doesn’t make sense you can sell.
        5. Income taxes would have to come down.
        6. A house sales tax, payable by seller would just be the government capitalising on the velocity of money.
        7. The city property tax stays, the city needs their income.

        For me lowering my marginal rate from 34% to 24% would lower my family tax from $43k to $32k. The 3% federal tax on the purchase price of my house would add $7,500. So I would benefit by $2,500 overall. If I paid $340k for my home I would be net zero with this change.

        1. Jimbo

          at 7:14 am

          Dang forgot to fix the marginal rate in the last paragraph.

          My marginal rate is 37% and my average rate is 27% I decreased it by 7% for the calculation.

        2. Jimbo

          at 7:19 am

          For a dual income family making $150k each their marginal rate is 43% and their average is 30%.

          There income tax would lower from $90k to $69k, so they could have paid $700k for a house and be net zero.

      2. Jimbo

        at 8:07 am

        Also, this would meet taxes from foreign buyers who don’t pay Canadian taxes but their home relies on our infrastructure.

        By tying it to purchase price rather than home valuation keeps the majority of our population insulated and it ties home prices to income.

    2. Christopher

      at 10:22 pm

      100% agree on the annual property tax and income tax. It’s absurd and arbitrary that a one million dollar house in Toronto requires an income of 150k paying 50k in income taxes, yet the annual property tax is what, 3k? 4K? It’s way out of balance and encourages property ownership over labour. Cut income takes and add it to property.

  20. Eric Law

    at 5:45 pm

    The article.is wrong as the guy saying not to buy in 2013.

    – rents have not kept up
    – rates are lowest in history
    – prices have skyrocketted 200k in 2 month for no apparent reason
    – little foreign investment so mostly debt

    Will it crash ptobably not but is it smart enough to buy a ptoperty in innisfill that cost the same in vaughan just year back… sudden spikes for no apparent reason is risky. The govt will step in to protect the banks and to give hope to future buyers. They just havent done it yet due to covid.

  21. jeanmarc

    at 6:01 pm

    Only wished I bought a few extra properties back in 2000. Townhomes in Rich Man Hill were going for $170K – $200K brand new in prime locations around Bayview Secondary.

    Darn!

    1. Unimpressedfemale

      at 12:59 am

      Eh small potatoes. Wish I kept those 100 Bitcoin but I spent it on pizza.

  22. J G

    at 8:36 pm

    Just because RE has done well in the last 15 years doesn’t mean it will continue to do well in the next 15.

    I will say the same about FAANG stocks.

    If you want to buy 416 condos or another investment property right now, go ahead, no one is stopping you.

    Garth has his funds, David is a realtor. Of course they’re both biased.

  23. William Jones

    at 8:47 pm

    There are a few reasons why real estate prices have been rising so rapidly… let’s start with the $43B brought into Canada from Hong Kong in 2020 since Mainland China is attempting to force democracy out of HK. This year 2021 will see an even large influx of $$$ from HK and of course other parts of the world as our immigration policies are looking to add another 1M to the population. Housing will be at a shortage for the next several years.

    1. Christopher

      at 10:26 pm

      I like a good scapegoat as much as the next person, but that same report also mentions the flow of money from Hong Kong is up 10% from the previous year. Why didn’t the 39 billion in 2019 cause the housing market to shoot up?

      1. Condodweller

        at 11:54 pm

        Perhaps because the market was still recovering from 2017 and there was no pandemic and widespread FOMO?

        1. Christopher

          at 7:52 pm

          Yes, none of which are related to money from Hong Kong. Prices are going up for reasons other than 10% more money from Hong Kong.

      2. Bal

        at 8:19 am

        Agreed…that what i was wondering…..i thought the market didn’t shoot up due to the interest rates…but again i am not an expert

  24. Ronald Macdonald

    at 6:33 am

    You’re a pompous fool with a grindy, arrogant and slimy writing style.

    1. I like T.O.

      at 7:55 am

      Yet, he is right. Do I sense some bitterness here?

    2. Sirgruper

      at 9:19 am

      Do you mean forthright and willing to put out unfiltered thoughts as pompous and arrogant. And what the hell is a grindy and slimy writing style?Never heard that comment throughout my schooling. Then again I never went to clown college. How’s your retirement from fast food going by the way?

    3. Chris

      at 4:56 pm

      I agree with you Ronald, Elon musk said it best, clown college is just as effective as the school this groupy above me went to

      1. Sirgruper

        at 12:06 am

        Actually they have Ringling College of Art and Design in Sarasota. Wow Chris hard day at the office?

  25. a.m.

    at 8:54 am

    I thing the gov’t will do something. A lot of articles and think-pieces about ppl being priced out of their own communities. Not just in cities but towns all over Canada. Mostly everyone only thinks the houses/condos are going higher and higher. Forget about why, the question whether this is sustainable needs to be (and obviously many times in the last few decades has been) asked. Combine that with covid, combine that with rising prices in raw goods to renovate houses/everything (look at groceries!) it’s evident that enough of a fuss will be made. Now whether whatever the gov’t does will be effective? Lolllll, who knows.

  26. John

    at 9:17 am

    Maybe there’s no bubble, but realestate companies have made billions over the years in unfair commissions for little work .
    I think it’s time to regulate them like in the UK.
    One day Toronto’s market will be to high for the average Joe, that’s when the upper class will take over like in New York City.
    Plus who and why would anyone want to live in a congested poluted hot city like Toronto to start with.
    These big cities are being swallowed up by new imigrants willing to pay the price to live there!

  27. TacoTuesday

    at 9:33 am

    I’ve been bearish on the Toronto market since 2017. It’s corrected since then and there is a fair chance it will correct again. Look at historical prices. Every time there’s been a 30+% year over year run up on real estate, there’s been a crash right afterwards. It happened in 1974, again in 1989, and now prices are up over 30+% yoy from 2020. Suburban detached houses in Toronto are now considerably more expensive than those in New York City. Toronto ranks among the most unaffordable cities in the world on the basis of income to housing costs. Now interest rates have hit rock bottom and have nowhere to go but up. If it does finally crash, yes the bears who’ve been sitting on the sidelines since 2008 will still be in the red. Alongside those who are buying today after the huge runup we’ve had over the last few months. I’m not giving in to FOMO and buying real estate this year. If a crash doesn’t happen and I can’t afford a Toronto home in a few years when I turn 30 and enter my home buying years, then so be it. There’s still plenty of affordable places in the world where I can start a life.

    1. Bal

      at 10:31 am

      Hello Real estate Gang or i should call experts…….there must be some impact on the house prices as Treasury yield is moving higher….if this is impacting stocks i am sure there will be some impact on the crazy house prices…again i am not an expert but hoping prices to come down …..10-year Treasury yield hits 14-month highs, topping 1.77%. …..i understand that house prices are impacted by many factors ( population….jobs….foreign money)but according to my logic…biggest factor is interest rates….

    2. Bal

      at 10:52 am

      wish i can move to some affordable places too ????‍♀️….maybe Himalayas…????

      1. TacoTuesday

        at 11:09 am

        Most of the US is still fairly affordable. Three of my friends moved to Texas in the last couple of years. I’m sure there are tons of new graduates from STEM fields looking to move to the US. I think brain drain will become a real issue for Canada in the coming years if the housing problem isn’t fixed.

        1. Chris

          at 11:25 am

          “I increasingly think of our housing affordability (+ childcare affordability) crisis as also a corporate competitiveness issue. Want to attract and retain the best people? It’s harder in places like Toronto and Vancouver and/or need to pay much higher wages. Either or, it hurts”

          Frances Donald, Global Chief Economist & Head of Macro Strategy – Manulife Investment Management.

          https://twitter.com/francesdonald/status/1376135184735731712

    3. QuizzKid

      at 11:15 pm

      “…and now prices are up over 30+% yoy from 2020.”

      The average GTA home price in February was up 14.9% from February 2020, not 30%. If you’re referring to a particular market segment, please say so.

    4. Unimpressedfemale

      at 1:01 am

      Or you can rent! What’s the big deal about renting. It’s a bargain in Toronto.

      1. jeanmarc

        at 11:09 am

        Due to personal reasons, I rented for one year back in 2013. I literally gave away $18K for one year and left without anything. Ended up buying again in the same year and thought the prices were high back then. Until the prices peaked in May 2017 and skyrocketing again now. Owning is always the way to go than renting and getting someone else rich.

        1. James

          at 11:33 pm

          “Gave away”… give me a break.

          Housing costs money. Even if you own you are paying property tax, potentially condo fees, maintenance, opportunity cost on a down payment. I could afford to buy the place I live in cash, no mortgage. Don’t want to – currently a bad value proposition in Toronto.

          Your idea of “owning is always better” is such a financially illiterate position. Very Canadian of you.

  28. Appraiser

    at 1:32 pm

    “Rolling 30 days of Condo sales actually fell this week after 10 weeks in a row of climbing. MOI remaining close to 0.9 for last 6 weeks.

    Freehold MOI has set between 0.91 and 0.99 for last 5 weeks.

    Though both are stable, they’re definitely deep in seller’s market territory” ~ Scott Ingram

    https://twitter.com/areacode416?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor

    This market needs a ton of new listings to even start to cool off.

    1. Bal

      at 1:52 pm

      hold horses my friend Appraiser…..buyers time will come ..:lol

  29. Rick Smithers

    at 3:57 pm

    There will be a crash… When interest rates go up, or the unemployment among the homeowner class goes up. When will that be? I have no idea. Right now, there is a huge amount of cash chasing too few opportunities. Bonds and GICs are absurd, so the money is going into housing. If interest rates go up, the money will have another place to go, plus mortgage renewals will be punishing. So real estate will crash. The doomsday guys from a decade ago were not wrong on real estate ..they were wrong on interest rates.

    1. Bal

      at 4:32 pm

      ????

  30. Chris

    at 4:52 pm

    This is a logical opinion from a veteran economist … oh wait its not. Sorry what? Your a real-estate agent? No bias there. Whats better then someone quoting Einstein then a salesman essentially who understands supply and demand but not the fundamentals of fiat economics. Keep printing more money! It’ll be fine! No value lost! Especially when the economy hasn’t established how far in the hole they are because they keep putting bandaids on it . This is a classic case of trying to determine the destination without a map to get there. Huge ponzi scheme with no end in site but hey listen to this guy sell you another house thats not worth a million dollars so he can make his percentage for doing nothing. I understand you want this to be true but looking for sources to apply your preferred outcome doesn’t make it reality

    1. Chris

      at 7:24 pm

      If you’re going to co-opt my name, at least try to employ your/you’re and then/than properly.

  31. Daniel

    at 6:34 pm

    Housing prices skyrocked, because of the price of lumber. and building materials and a labour shortage in the housing sector..To build a home today it cost 500.00 a sq/ft Covids the reason the housing prices are going crazy..

  32. Kenny Coffin

    at 7:26 pm

    It’s painfully obvious that you are blind to the nature of the construction industry and the financial business that supports it. Land does not accumulate value based on supply and demand principles and it is not a commodity that the central banks put value on in a primary liquidity currency exchange kind of way.
    If you think subsidized financial market spending is sustainable forever on keeping inflationary rates low while pegged interest rates at 1-2% are reasonable while housing markets grow by over 400% in nearly a year, let me ask you this: how long before inflation jumps to 4-7% to 50% without a Bank of Canada adjustment?
    The market you are so heavily invested into is a fraudulent market and it is being artificially sustained by a fraudulent government.
    Bernie Madoff made billions before he went to jail.
    Hell, the Chinese government stole 42 billion a year out of Nortel!
    How long can you preach from a fake pulpit built on fake wealth when the government does finally shrug?
    What do you tell your fellow cultists when they see that not only is the currency devalued but the credit of Canada is downgraded by the IMF yet again?
    What do you do when your currency and property have no value because food is now scarce, jobs are gone and your condos are not farms?
    It’s more important to invest into people and agricultural development because these are sustainable. Land is only sustainable if it is shared.
    If it’s artificially subsidized it’s basically a free loan which can be arbitrarily changed into an extortion deal or arbitrary acquisition by a municipality or government organization.
    If you are so sure of this, why is property ownership not enshrined in the Charter of Rights and Freedoms?
    Because you are fundamentally wrong sir.
    Property rights are not guaranteed nor protected. Therefore under the Charter. OUR very own Constitution, property HAS NO VALUE!
    Human Rights are enshrined but property is not.
    Property ownership is a privilege much like driving a car. It’s not a fundamental human right.

    1. Amanda

      at 7:06 pm

      “Property ownership is a privilege much like driving a car. It’s not a fundamental human right.”
      When people who grew up in Canada and are employed cannot afford to buy a home or land in the one of the biggest countries on earth, you have a major problem on your hands. Eventually they will vote for communists. I am seeing this attitude shift of formally conservative young people happening and they are very angry. Sorry boomers with 5 houses your days are numbered, young people are already demanding what you have is taken from you by force-and their numbers grow everyday.

  33. Jorge Rida

    at 8:00 pm

    “tenet” not “tenent” (apologies if this has been mentioned already)

  34. Rozella Gonser

    at 8:09 pm

    I know I m with you

  35. Rosa

    at 9:57 pm

    Excellent thought provocative article.

  36. Steve

    at 10:10 pm

    There are only so many desirable places in canada. It’s not rocket science to figure out that the closer the $ is the higher the price.

    Immigrations policies, growth expectations, low interest rates, building costs all add to the price. People seem to forget how compound math works.

  37. Cold Water

    at 7:12 am

    People need to understand what is happening here. Government has spent billions in the pandemic. The only way to gain the money back is for people to cash in their savings and to raise taxes. They could not raise taxes directly so what they have done is let people spend more which they have in real estate. That has brought a lot of undeclared money into the taxable system. Now once locked in they will slowly turn the screws to balance their books through increased taxes etc. As long as someone does not take the money and leave Canada its works for the government. Government won’t step in and why should it. If someone feels a house is worth 2m and is willing to pay it then so be it. the government will sit back and collect it tax and get all they money they spent back eventually. No one loses.

  38. Pauline

    at 9:46 am

    You are spot on. I also am weary of hearing about the bubble busting for so long. When I purchased my first real estate in 2008, a couple of my friends were laughing at me saying I should have waited for the bubble to bust. Today I am laughing at them.

  39. Dave

    at 11:10 am

    Just because crash is not coming, does not mean the market is not in a bubble!!!

  40. Investor

    at 11:38 am

    Corrections and crashes will occur in this market, with virtual certainty. The only question is WHEN. It is essentially the same as trying to time a stock market crash – people go on for years saying it will happen and are wrong, but eventually, it does. No one can predict the when, same goes here, but history shows that market corrections and crashes are inevitable and repeat cyclically.
    For those that think Toronto houses will continue to increase in value linearly or exponentially ad-infintum, I ask this: please show me one market (anything – gold, bonds, stocks, art, coins, whatever) that has NEVER underwent correction/crash. There are none. Do you really think the real estate market in a medium sized city in Canada is going to be only market in the history of human civilization to buck that trend? But, like I said, no one can accurately predict the when. It is a wait and see game. Demand can only go up to a point where customers can pay. There may be very high demand that outweighs supply for a product or commodity, but it is unaffordable (literally can’t be bought), the price must drop until someone can pay. Once this point is reached, which may be hard to predict, prices will drop.

    1. Kyle

      at 5:37 pm

      Yes even Toronto RE corrects and sometimes even crashes. I think this is pretty obvious, but not very relevant information. Most people don’t buy real estate with the intent to turn around and flip it, so what’s relevant is what happens if you buy and hold it for a reasonable amount of time?

      Using a 5-year holding period, if you look at the history of Toronto RE prices, there are only 5 years (1988 – 1992) out of the last 46 years, where if you bought real estate you would be in the red. With an average return of -14%. Not great, but presumably if you didn’t buy during that period, you would have had to pay rent somewhere (or if it were an Investment, presumably you would have been collecting rent). The other years you would be in the black. With an average return of 49%.

      Also Toronto is not a medium sized city in Canada, it is the fourth largest city in North America. And finally Economics doesn’t work the way you describe. Prices adjust to where Demand meets Supply, Demand does not suddenly disappear when prices get to high, because by definition prices always lie somewhere on the demand curve.

      1. Brad

        at 5:18 pm

        What I don’t get is who is buying? You are right that Toronto is the 4th largest city locally, but not in the top 10 globally. I have many wealthy friends, at least 3 who are billionaires currently. They do not have property in Toronto. They are American and own places in New York, London and nice warm places – LA, Palm Springs, etc.

        The prices quoted here seem ridiculous to me. Immigrants are mentioned but what immigrants can afford a $2 or $3 million dollar home with entry level jobs? I think it is a Ponzi scheme. Lots of market manipulation and touting by realtors who make money off it. You can justify it all you want but ‘Canadian housing crash’ is the number 3 trending search on Google right now (April 1st and was #5 on March 27, 2021) – that says something.

        Remember – when it starts it goes fast…last one off the train is the one with the worst losses.

    2. Jorge

      at 10:08 pm

      “has NEVER undergone”

  41. J

    at 12:04 pm

    If you stick to a crash is coming… eventually you will be right. Free markets ebb and flow, so one day the market will ebb.

    The issue with real-estate; is it has turned into a “to big to fail” issue. Gov’t and central banks have used everything in their tool kit to support housing prices since 2007. A fail in housing value will destroy the Canadian economy. Real-estate accounts for over 15% of GDP… of course this leads the world, and makes Canada’s economic success linked to real-estate increasing forever.

  42. Joey

    at 12:49 pm

    This is a good article but I wonder if a crash will still happen nevertheless. Economies are cyclical they drop , recover and goes up and then drop again … Can’t we say that about housing market? Wouldn’t the housing market eventually have to follow the cycle?

  43. ed

    at 1:17 pm

    Rich advice from old (older) wealthy folk who have bought and sold at a profit multiple times–to remove or reduce the capital gains exemption on primary residence. Akin to Warren Buffet, a rich 80 some year old, saying raise taxes on the rich; what’s a few million more in tax for one like that (the reality is any taxes target the middle class anyway). There are many other ways to make housing affordable. Start with removing red tape, permit costs, etc for builders. Target investors. But enough of trying to disguise self-righteous preaching as being good for us. If you were a 30 or 40 some year old who had just bought your first house would you be saying that?

  44. jeff chalk

    at 2:14 pm

    good article

  45. antb

    at 3:45 pm

    Chart real estate debt to housing price and it is correlated almost one to one.

    We owe ourselves the debt so let the party continue – let’s become Japanese

  46. Steve Mitchell

    at 9:20 pm

    Only four things will cause a crash worthy of that name:

    1) Much higher interest rates. Like 8% on the variable almost overnight.

    2) Much much lower immigration. Like zero newcomers for several years.

    3) Much much much more supply. Like razing half of the ground-based homes in the GTA and replacing overnight with 50-storey towers.

    4) A much much much much deeper recession than we’ve seen since the 30’s. Like indistinguishable from the 30s except everyone in Hooverville will still have a smartphone.

    4) Two or more of the above.

    Slowing? Yeah. Flattening? Sure. A correction. Maybe.

    But a crash, no.

  47. Robert

    at 9:06 pm

    I have two words for you: Paul Volcker

    If you began in the biz in 2004, I gather you did not live through his time in the late 70s. Inflation is already popping in a real way, this will only get worse as people around the world start driving again over the summer as things open up, plus there has been a huge destruction in US oil supply that is NEVER coming back, plus Mexico, plus Venezuela. Add a few extra trillion dollars around and inflation may become a real thing again, in a way that may force the Fed and others to do what Volcker did. I would imagine that even 7% rates would more than pop the bubble, let alone 10, 14 or 20%.

  48. K. Sira

    at 12:17 pm

    You are right, people who read these so called author’s like Garth Turner lost a fortune waiting to buy their first home in the past ten years or more. They make money selling books and poor people just suffer in a big way.

  49. Joey

    at 5:56 pm

    I can tell from seeing 15 years of ‘advices’ from these so called experts that there is none bigger manipulator of any market than these so called experts. Not sure why they are even allowed to play with people’s minds to buy and/or sell when even these experts don’t know what is going to happen in next 3 months. If so influential, then just ask banks to tighten the rules instead of scaring away common buyers and sellers. This is our hard money put into a biggest investment in any common people’s lives. We are not INVESTORS.

  50. Ciena

    at 5:20 pm

    So happy I found your blog. You are hilarious and I’m learning a lot from you in preparation to sell and buy again. Downsizing for financial reasons. I’m wondering if you think the government will tax capital gains in some way and soon (perhaps Monday). As well what is your advice to me someone who was planning to sell soon (besides go back in time 2 months to complete)? I realize from your post you said no effect but initially wouldn’t it have some impact … like when they introduced spec and vacancy tax in Vancouver?

    I really really hope they don’t as I was relying on my gains. So hopefully you will tell me I have nothing to worry about, this capital gains tax is unlikely, political suicide for JT etc

    Thank you!

  51. EN

    at 7:52 pm

    It will crash , when
    1. People in power can’t make easy money from it
    and/or
    2. When housing are industrialized to bring mobility , configurability and resizability

  52. ErfanS

    at 9:25 am

    You just talk like any other realtor, you are trying to to prove your point by showing how others failed at their forecast of crash in the past 13 years and timing of it, 13 years in real estate market is not a long time when you look at historical cycles. Supply/demand? sure that is your logic, it is every realtor logic but when we look at official numbers, listings in the past couple of years were higher than average, it was not necessarily a supply issue, a surge in demand that most part of it came from speculation is not a real demand. This is not sustainable, you can call it “crash”, “correction”, or any other term that makes realtors like yourself happy, but one thing is clear it will not last… the very mindset that real estate can never go down is as wrong as the mindset that real estate will crash next month or next year, nobody can set a time, but one thing is clear, the longer this party goes on, the harder that fall/crash/correction/(put your term) would be.

  53. Mardig Bidanian

    at 9:16 pm

    Canadian exorbitant housing prices are the price of not going into a bad recession. When the market was “cooled down” in 2015 and 2017 it was still higher index prices than the US and Spain had when their housing prices collapsed. The Canadian economy is too tied to real estate , if real estate crashes a lot of the Canadian economy goes with it.

  54. Martin V

    at 6:16 pm

    It will never crash.. Blah blah blah.. It wil forever go up… Blah blah blah. You are right, you don’t need to be a PhD economist to understand that what goes up must come down, and that real estate market is a cyclical industry everywhere, all around the world, just like any other industry. It is one of the basic rules within investment world that market can stay ineffective for much longer than you can stay liquid, but EVERYTHING reverts back do long-term mean, and Toronto real estate market will crash with a BANG. It has long passed a point of “soft landing”.

    1. Ennis

      at 7:21 am

      I’ll love to see that, believe me. The problem is that the Canadian goverment here injects money in the housing market and the economy in general to avoid a crash. Look at all these Covid19 relief money: both Liberal and Democrat approved it. Why? To avoid a housing market crash.

      It is also the Canadian Crown who owns the land and issues the permits to build, and chooses who do it. Politicians have their own money in this, and are friends with the owners of the bigger construction companies running the show to whom construction permits are granted.

      This isn’t something you could see clearly in Toronto in an individual house sale but it is how the inner country of Canada works. And it is difficult to do anything about it because Canada is not a full democracy with well developed instruments of governance and a practice of transparence. It will be hard to cut the profits of many politicians and contracting companies that are profitting of the mess in a smaller scale but all along Canada; in every little town where they also keep the roads transitable, the gas and oil pumping, the railways functioning, etc.

      Whatever rules apply to the market in USA or Europe do not apply in Canada. Canada is some sort of capitalist republic, with features of colonialism and even feudalism. It works for some but not for everyone, specially does not work well for the working class that is whom modern democracy is suposed to work for and that’s the ugliest and saddest part of the whole thing. But who cares …

  55. Ennis

    at 6:44 am

    The housing market is not going to crash because “The Crown” owns all the land and it is who authorizes or not the construction of new hones. This way the supply stays low and the prices high, because it keeps the Canadian dolar strong.

  56. Ennis

    at 6:56 am

    The bubble is going to deflate after another half century of speculation when a few real state oligarchs arise and start to invest their funds abroad. Or when the smaller individual investors start to do this in mass; and the goverment have to put a stop to ‘the bubble’ once their pals from the RBC tells them it does more harm than good.

    Or definitely when the research for green and blue energy yield fruits and nobody wants the Canafian oil anymore.

    One thing is for sure about the bubble and it us that since it’s leaving Canadians without investment capital, stagnating the middle sector of the economy and the overall quality of life of many Canadian people. That does not matter to the policy makers because they are rich though.

  57. Pingback: The housing bubble, will it pop? - Griffin Gillis Dominion Lending Centres
  58. Eric

    at 1:50 pm

    I find it funny that people say ‘if the pandemic can’t stop RE nothing can’ Do people fail to realize that if the housing market was truly a free market and none of these deferrals on mortgages, cc, etc.. were given then not only the housing market would crash but the whole Canadian economy would because of all the leverage/debt in the system would have exposed the unsustainable levels that people have accumulated and can’t service when there is no income coming in because people have grown accustomed to believe that having 3 months of living expenses on the side is a ‘waste’ of money. Piece of mind and being in control of your life is never a waste.

  59. Jehanzeb

    at 2:49 pm

    Do you think prices will rebound within the next 2 years?

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