The GTA’s top mar­ket mavens and mav­er­icks con­gre­gated, elec­tron­i­cally this time, to duke it out over their expert pre­dic­tions for the next great rise (or fall!) in res­i­den­tial real estate. Let’s get ready to rumble!

Postc​ity​.com

At our last round­table, our experts were, again, opti­mistic about the future of Toronto real estate. Top car­riage trade real­tor Elise Kalles sug­gested that the per­ceived mar­ket slow­down was a “sea­sonal” issue, not an eco­nomic one. Sherry Cooper, exec­u­tive vice-president and chief econ­o­mist at BMO Finan­cial Group, agreed. Garth Turner, our panel’s out­spo­ken busi­ness and real estate com­men­ta­tor (and for­mer MP), had a doomier-and-gloomier out­look: “The econ­omy is not eter­nal,” he pro­claimed, “it seems clear we’re in a period of defla­tion­ary angst.”

POST: Where are we today?

Sherry Cooper: The year 2010 was a great year for Toronto real estate, and despite the con­cern about over-leveraged house­holds, sales held up while price increases were mod­er­ated. Over time, home val­ues increase with incomes. Indeed, aver­age resale prices and per­sonal incomes both rose 5.7 per cent per annum in Canada in the past 30 years. How­ever, prices more than dou­bled (113 per cent) in the decade to late 2007 and grew twice as fast as incomes from 2002 to 2007 — largely due to the dra­matic decline in mort­gage inter­est rates and the eas­ing in credit con­di­tions by the Canada Mort­gage and Hous­ing Cor­po­ra­tion (CMHC). Even after slid­ing 13 per cent through the reces­sion, prices quickly rebounded and are now 10 per cent above their 2007 peak for Canada as a whole. Look­ing ahead, incomes should grow faster than prices in the next one and a half years — the time frame in which inter­est rates are expected to nor­mal­ize — allow­ing val­u­a­tions to improve. If incomes climb eight per cent and prices sta­bi­lize, as I expect, the cur­rent over­val­u­a­tion would fall to six per cent, hardly the stuff of cor­rec­tions. Grow­ing incomes and steady prices should sup­port afford­abil­ity in the face of expected higher inter­est rates. To date, low inter­est rates have kept afford­abil­ity in check.

Harry Stin­son: I am not an econ­o­mist, and even if I were, it seems one can find sta­tis­tics and experts to sub­stan­ti­ate opti­mism or pes­simism to any scale — so I can only offer my instincts and expe­ri­ence. Frankly, I am becom­ing uncom­fort­able with Toronto prices. Typ­i­cal “new con­struc­tion” prices in Toronto are mov­ing past the point of sen­si­bil­ity, in terms of pos­i­tive cash flow or resale upside.  That’s not to say that prices of $600 per square foot (and up) are inap­pro­pri­ate or unachiev­able in Toronto. Pre­mium dol­lars are jus­ti­fied and sus­tain­able for addresses such as the King Edward, Four Sea­sons, Ritz-Carlton or some build­ings in Yorkville, but there are tens of thou­sands of new units rolling onto the mar­ket tak­ing such price points for granted across the board.  More and more I am hear­ing peo­ple tell me about their “great invest­ment”: a one– bed­room for only $500,000, in a new build­ing the name of which tem­porar­ily escapes them at this moment — but it’s def­i­nitely in a “hot area.” With apolo­gies to President’s Choice, the term that comes to mind is “mem­o­ries of ’89,” when con­dos eased into becom­ing a finan­cial com­mod­ity rather than accom­mo­da­tion. When the major­ity of suites in most new projects are pre-sold to investors being wined and dined at lav­ish “VIP” recep­tions, my spidey sense starts tin­gling. I don’t antic­i­pate an across-the-board price cor­rec­tion, nor a wave of U.S.-style fore­clo­sures. But the pre­mium price band­wagon is over­crowded, and it would not sur­prise me if a num­ber of projects were redesigned, repack­aged or even deferred.

Garth Turner: It is com­fort­ing to hear Harry Stin­son has joined the ranks of the real­is­tic. Those who cry that Canada can­not and will not have a “U.S.-style” hous­ing cor­rec­tion are wast­ing their breath. A Canadian-style cor­rec­tion, given the tapped-out sta­tus of most fam­i­lies, is enough to worry about. A cor­rec­tion of, say, 15 per cent fol­lowed by a slow multi-year melt will be enough to make new­bie, equity-less buy­ers or boomers with the bulk of their net worth in a house, regret that they were ever lulled into a com­pla­cent stu­por by the real estate and bank­ing cartel.

Harry Stin­son: I am not book­ing pas­sage on “Garth’s ark” quite yet, but I’m cer­tainly no longer of the “Don’t worry, be happy” state of mind. And even if there is a cor­rec­tion, I don’t fore­see a wave of Cana­dian defaults. When prices dropped seri­ously in the early 1990s, most [Cana­dian] own­ers sim­ply held on.

Garth Turner: True enough, Harry. But the prob­lem is not defaults, it’s neg­a­tive equity. That dis­si­pates the wealth effect, which ris­ing house val­ues give and nukes con­sumer spend­ing. We do not need a “U.S.-style” hous­ing col­lapse here to reap sim­i­lar results. When most middle-class peo­ple have most of their net worth in one thing, time to split. Still some room on the ark, pal. The lem­mings left for an open house.

Harry Stin­son: Well, I will put my first-class ark ticket on my credit card.

Garth Turner: Excel­lent. I have an ark miles program.

Jerry Ham­mond: I cer­tainly believe we are in times of growth; our immi­gra­tion has increased year over year. This coun­try has a neu­tral posi­tion polit­i­cally and has a sound and strong econ­omy. I feel, due to polit­i­cal unrest in other regions of the world, we will con­tinue to be a favoured coun­try to reside in. The real estate val­ues may be increas­ing, but if we com­pare our pric­ing to other major cos­mopoli­tan cities, we are undervalued.

Garth Turner: Jerry, are you run­ning for pres­i­dent of the Board of Trade? Those words scream “trust me” to peo­ple con­sid­er­ing walk­ing into the great­est debt load of their entire lives, at rates bound to reset, to buy an asset that looks over­val­ued at best.

Barry Cohen: Res­i­den­tial real estate in the Greater Toronto Area has posted one of the health­i­est decades on record, with prices steadily increas­ing since 2000. Hous­ing val­ues have risen 77 per cent, up from $243,255 in 2000 to $431,463 in 2010. Given the cur­rent tra­jec­tory, since the lev­el­ling of 1996, real estate only has one place to go … UP. Unlike other Cana­dian mar­kets that have seen seri­ous double-digit increases in aver­age price, hous­ing in the GTA has appre­ci­ated at a sta­ble, healthy pace, a five and six per cent yearly rate. Given the many failed pre­dic­tions over the past 15 years, why cor­rect now? They have hardly got it right thus far. While the hous­ing units of sales may appear to have soft­ened some­what from 2010 lev­els, due to the lim­ited sup­ply, the mar­ket is expected to remain hearty, with the aver­age price fore­cast to climb a mod­est but healthy and sus­tain­able two to four per cent by year-end. What’s wrong with that?

Garth Turner: This is the kind of state­ment that so mis­leads inex­pe­ri­enced, impres­sion­able, house-horny young buy­ers. I almost fear it is intended to do so. But I’m wor­ried even more that you believe it. Real estate is an asset class like all oth­ers. It does not go up for­ever. It is heav­ily influ­enced by eco­nomic fac­tors as well as hor­mones. And those who say buy now or buy never are almost always the sell­ers. I would coun­sel first-time buy­ers to put their desires back in their pants and wait for an inevitable price cor­rec­tion. Buy­ing today with five per cent down is to con­demn them to being under­wa­ter with the first move down­wards. Barry’s good at pump­ing sun­shine up rear ends, but not so much at being responsible.

Harry Stin­son: I can’t say that I am as cat­e­gor­i­cally cer­tain of where the world is head­ing as some pan­elists seem to be, but I am very uncom­fort­able with the assump­tion that “real estate can only go up.” For some rea­son, I have visions of Leslie Nielsen calmly reas­sur­ing peo­ple that there is noth­ing to worry about (“Return to your homes; the gov­ern­ment has every­thing under control.…”).

Brad Lamb: Two thou­sand and ten was not the best year in total sales in the his­tory of Toronto. It was actu­ally the third. It was, how­ever, a very good year. It also appears that 2011 will be a strong year as well. I expect that 80,000 resales will take place this year, mak­ing 2011 a year not unlike 2003 in vol­ume.  We do have a prob­lem in Toronto. Prices are ris­ing too fast. This is an issue for basic afford­abil­ity. It is also a prob­lem for con­do­minium investors look­ing to carry an invest­ment with a 25 per cent down pay­ment. They can’t. If these five to 10 per cent annual increases con­tinue, we will have a cor­rec­tion regard­less of the strength of the econ­omy. Essen­tially, what will hap­pen is new devel­op­ment sites will have to shut down due to poor sales. Garth’s sce­nario is unlikely. Most of the risky mort­gages were done two years ago, and by and large, these buy­ers now have excel­lent lev­els of equity. The U.S. melt­down was ini­ti­ated through wildly inap­pro­pri­ate lend­ing prac­tices due to a unique bank­ing and mort­gage sys­tem in the U.S. We do not prac­tice any­thing remotely like the U.S. model.

POST: Eigh­teen thou­sand new con­do­minium units went up in the GTA last year. Another 17,000 will go up this year, and another 20,000 will rise next year — mean­ing Toronto will have more condo units for sale than any other city on the con­ti­nent. Are we over­sat­u­rat­ing our mar­ket with con­dos? Is this por­tion of the mar­ket most vul­ner­a­ble to a correction?

Garth Turner: [In response to Brad’s com­ment:] This is a handy piece of Cana­dian myth, which also goes to the nature of the ques­tion regard­ing con­dos. Those prop­erty vir­gins enticed into buy­ing with 5/35 financ­ing two years ago only have equity now because of the illu­sory nature of mar­ket val­u­a­tions. They have not paid a thou­sand bucks off their prin­ci­pals nor dumped in more cash. They are repeat­ing the faux mar­ket mis­takes of our Amer­i­can friends, think­ing that unre­al­ized cap­i­tal gains are in fact real money. They’re not. And they will van­ish in the slight­est of mar­ket cor­rec­tions. This is the dan­ger that it seems nobody on this panel is will­ing to acknowl­edge (except Harry, who knows bet­ter), given the rit­u­al­is­tic chant­ing of “real estate always goes up” I’m hear­ing. It’s hard hav­ing a cogent argu­ment with cheer­lead­ers. Too damn flirty. We have allowed peo­ple with­out money to buy houses. We’ve low­ered lend­ing stan­dards. We’ve intro­duced teaser inter­est rates. We have zero-down financ­ing and liar loans. And we believe a mar­ket cor­rec­tion is impos­si­ble. So how are we not “any­thing remotely like the U.S. model”? Toronto con­dos embody this dan­ger. The worst real estate invest­ment in the coun­try. Well, east of Rich­mond [B.C.].

Brad Lamb: Garth is mas­sively over­stat­ing the sit­u­a­tion. Unlike the U.S., we never aban­doned sane lend­ing behav­iour and quickly moved to adjust in areas that were too lax. It was over two years ago, when zero per cent down and 40-year amor­ti­za­tions were pos­si­ble. In that time (based on a $200,000 one-bedroom, 500-square-foot unit), a buyer would have paid down $5,000 to $7,000 of prin­ci­pal and accu­mu­lated $75,000 cap­i­tal gain. This cur­rently would give the buyer almost 30 per cent equity. There is no tick­ing time bomb.

Barry Cohen: It has become appar­ently obvi­ous that con­do­mini­ums are cer­tainly becom­ing the first step in home own­er­ship for many first-time buy­ers in the GTA. Erod­ing afford­abil­ity has been in large part behind the push in recent years, but other fac­tors have come into play, includ­ing location.

Harry Stin­son: Frankly, I do not fore­see a pub­lic melt­down of the Toronto condo mar­ket. Builders will likely defer some projects and deal with ner­vous pur­chasers on a case-by-case basis. “Bet­ter” projects (loca­tion, spon­sor, design) will con­tinue. As usual, the peo­ple who will lose out are the more highly lever­aged small investors, who will sign releases — and walk away from exist­ing deposits — in order to avoid hav­ing to pay fur­ther deposits and come up with clos­ing funds. They will qui­etly take their lumps in the Cana­dian way. Even more sad, by the time the build­ings are com­pleted (in sev­eral years) their units might well be worth as much or more.  Mean­while, the deep-pocketed investors will indeed close and pos­si­bly work with the devel­op­ers to absorb the rescinded units for the bal­ance due, or less.

Elli Davis: I was involved in two bid­ding wars tonight on two houses (both sold over ask­ing). I can’t say the same for my condo listings.

POST: In our neigh­bour­hoods, the homes are reach­ing astro­nom­i­cal heights. What we’d like to know is who is buy­ing up these multi-million-dollar homes on estab­lished streets in areas such as Lawrence Park and Hogg’s Hol­low? For­eign investors or locals?

Harry Stin­son: On this issue, I will prob­a­bly agree with Garth even before read­ing his com­ments.  Once upon a time, peo­ple looked at cer­tain houses and thought, “Wow” (and assumed they must be expen­sive). Now, they look at prices and think, “Wow, for that house!?” With­out get­ting into a big-picture socio-economic analy­sis of where and who the money is com­ing from, there seems to be a grow­ing dis­con­nect between prod­uct and price. If any­thing, this trend speaks vol­umes about the desir­abil­ity of Canada — and Toronto — as a place to live. I am def­i­nitely an advo­cate of condo liv­ing, but when own­er­ship costs become $4,000, $5,000 or $6,000 per month, then big-picture socio-economic fac­tors become less and less rel­e­vant on an indi­vid­ual or fam­ily basis.

Jerry Ham­mond: The obvi­ous answer to that is build­ing small suites.

Harry Stin­son: I do under­stand the con­cept [of small suites], but when the prices for small suites are creep­ing into the $500,000-plus range, that’s when we should get nervous.

POST: Brad Lamb, Garth Turner, any­one else care to comment?

Garth Turner: On who is buy­ing in to the horsey set areas of North Toronto? Who cares? This is a road the delu­sional fools in Van­cou­ver and Rich­mond have been trav­el­ling down, trump­ing up Main­land Chi­nese buy­ers’ influ­ence and then using this as a mar­ket­ing tool to encour­age the cit­i­zenry to “buy now or buy never.” The truth is that off­shore money is a tiny frac­tion of all Cana­dian mar­kets and will remain so. Toronto (like Van­cou­ver) does not rank among the finan­cial or cul­tural cap­i­tals of the world. We are cheaper than Lon­don, for exam­ple, for a rea­son. Namely, this ain’t Lon­don. More inter­est­ing is who’s buy­ing Lea­side? Million-dollar homes with dodgy foun­da­tions on lots not wide enough to have both a lawn and a dri­ve­way go to the heart of the house horni­ness that has pro­pelled prices to a level from which there is only one future track. This will not end well, for the rea­sons I artic­u­lated ear­lier in this thread and which pan­el­lists have ignored.

Elli Davis: Trad­ing up and trad­ing down seems to be what’s keep­ing me very busy. The over-60 group are divid­ing up the wealth between cot­tages, golf clubs, trav­el­ling or giv­ing “Junior” the down pay­ment for a condo (there’s that word again!) or duplex. Inher­i­tances are play­ing a large part of the new wealth as the boomers are aging and going to never-never land! The trading-up group are pro­fes­sion­als —bankers, doc­tors, den­tists, lawyers, busi­ness own­ers, in their 30s to 50s, who are reap­ing the ben­e­fits of the low mort­gage rates and start­ing to spend some of their hard-earned sav­ings. Many did not spend much from Sep­tem­ber 2008 to late 2009! It’s not sur­pris­ing to hear of a $2 to $3 mil­lion pur­chase with a $500,000 to $1 mil­lion mort­gage being arranged.

Garth Turner: Holy crap. When this obser­va­tion is entered into a gen­eral dis­cus­sion of real estate in our region, we’re in deep trou­ble. Edi­tors, save us! We’ve hit a ’burg.

Harry Stin­son: Not to worry, fel­low pas­sen­gers, the band is still play­ing …  (it’s but a flesh wound).

Elise Kalles: High-end buy­ers are com­ing from China, Korea, Rus­sia and Europe. Also, Cana­dian buy­ers are pur­chas­ing these high-end homes. It’s dif­fi­cult to say what debt load they are car­ry­ing as they arrange financ­ing independently.

Jerry Ham­mond: The lux­ury mar­ket is cer­tainly influ­enced by our for­eign buy­ers. They seem to find our real estate rel­a­tively inex­pen­sive com­pared to other major cos­mopoli­tan cities. The for­eign­ers are immi­grat­ing from China, Iran, Korea, Rus­sia, parts of the Mid­dle East and regions of Europe. Their min­i­mum require­ments are 35 per cent to 50 per cent for a con­ven­tional first mort­gage, if they are not Cana­dian cit­i­zens, and as low as 25 per cent if they are Cana­dian cit­i­zens and can show proper income qual­i­fi­ca­tions. I would esti­mate that they make up a large part of today’s lux­ury mar­ket. They are buy­ing in Canada because of our stan­dard of edu­ca­tion, our social well-being, qual­ity of life, polit­i­cal sta­bil­ity, health care and our con­tin­u­ing eco­nomic growth, due mostly to our nat­ural resources.

POST: Would you rec­om­mend to your son or daugh­ter to buy a house in this mar­ket now, with a rea­son­able down pay­ment and stan­dard mort­gage terms, or to wait it out and risk being priced out entirely?

Mike Eppel: Try­ing to time a mar­ket is next to impos­si­ble. There­fore, if my son or daugh­ter had a solid down pay­ment and low mort­gage costs (locked in over a min­i­mum of five years), I’d be com­fort­able telling them to buy now. It comes down to time hori­zon and per­sonal finan­cial lev­els. If you’re going in with the bare min­i­mums for afford­abil­ity, you’re likely going to strug­gle. Also, if you’re plan­ning on mov­ing again within three to five years, you’re prob­a­bly going to see min­i­mal price appre­ci­a­tion or pos­si­bly a slight retreat for prices (condo mar­ket likely more risky). But buy­ing some­thing in a desire­able neigh­bour­hood with solid finances to back it up should not be a prob­lem. One thing the local mar­ket has been is resilient, so even a decline in prices would likely jump-start the next uptrend (depend­ing, of course, on inter­est rates).

Elise Kalles: Prices have gone up 5.4 per cent, per year, every year for the last five years. For most peo­ple, the best invest­ment they have made is the pur­chase of their home. With cap­i­tal gains ben­e­fits and the fact that you can’t live and raise your fam­ily in your stock port­fo­lio, I believe that a home pur­chase is a great decision.

Harry Stin­son: Don’t take this per­son­ally [edi­tors].   First, the ques­tion itself suf­fers from a per­spec­tive that has become all too com­mon: we are treat­ing our homes as if a stock mar­ket invest­ment. Given the con­text (advice to our chil­dren), my advice would be “Yes, you should own your own home. Notwith­stand­ing the mar­ket cycles and the end­lessly chang­ing insights from experts, you should become — and stay — involved in real estate as a home­owner. If you feel inclined to trade in addi­tional real estate as an invest­ment, then as of early 2011, frankly, I would be very, very care­ful.” As for wor­ry­ing about “being priced out entirely,” if any­one hands you this line, I would walk away and make a note to call the sales­per­son in a month or so.

POST: Don’t worry, Harry, we’re OK.

Jerry Ham­mond: Yes, I would absolutely rec­om­mend that my son or daugh­ter pur­chase a home in this mar­ket. I believe you have to view the mar­ket long-term. Inter­est rates are at a record low, and stud­ies show that real estate has had a steady incline of approx­i­mately six to seven per cent per year, which trans­lates to a strong return on invest­ment in com­par­i­son with other invest­ment options.

Elli Davis: It’s all tim­ing and afford­abil­ity. The answer is yes, as long as there is a cush­ion if inter­est rates rise and there is an ample down pay­ment. I would not sug­gest the pur­chase if it is intended as a fast flip or turn­around, as there can be dips in the mar­ket, as we expe­ri­enced in late 2008 and many other times before.

Barry Cohen: Sure I would [tell my chil­dren to buy real estate]. As a mat­ter of fact, my son looked cau­tiously for a year and only just pur­chased a cou­ple months ago. I told him that real estate is long-term. And he could hold it and pos­si­bly resell it to Garth’s kid when the mar­ket cor­rects. Which is when, again, Garth? Oh yeah, every year.

Garth Turner: If I hated my kids, I would encour­age them to go and see one of the house-pumping pan­elists who have been part of this dis­cus­sion. In fact, the very ques­tion, as posed — buy now or risk being priced out of the mar­ket — reflects the blindly pro–real estate bias that has infected our media, our lives and turned TV into non-stop house porn. Encour­ag­ing a buy now by a young per­son with five per cent down is insane. Dan­ger­ous, reck­less and myopic.

POST: In the GTA — single-detached or condo — that would be a safe area? We know Garth seems to cite the fur­ther reaches of the GTA as par­tic­u­larly risky, but what areas are par­tic­u­larly safe … if any?

Harry Stin­son: Given that we are talk­ing pri­mar­ily about people’s homes (rather than spec­u­la­tion, right?), it would be unwise to focus on “get­ting a good deal” in a loca­tion where you really don’t like liv­ing.  In gen­eral terms, the closer to the core (and rail tran­sit), the bet­ter. A truly “safe” area? How about Mount Pleas­ant Cemetery.

POST: In a year from now, where will we be?

Harry Stin­son: Frankly, still in the GTA ago­niz­ing over essen­tially the same ques­tions.  Prices will likely have sta­bi­lized and prob­a­bly soft­ened in the new (pre-sale devel­op­ment) condo mar­ket. Quite likely many projects will have been post­poned, although the pub­lic will not be as aware of this (those that are already on the mar­ket will con­tinue, with inter­nal tweak­ing and sales incen­tives offered). I really do feel uncom­fort­able with upper-middle-class house val­ues (not the super-premium mar­ket) where I think we will see six-figure soft­en­ing. How­ever, Toronto’s pop­u­la­tion will con­tinue to grow, and prop­er­ties will con­tinue to be occu­pied. Unlike many areas of the United States, we do not have — and will not have — neigh­bour­hoods, or even build­ings, with notice­able pro­por­tions of vacant and/or fore­closed prop­er­ties.  That’s not to say that every­thing will be won­der­ful. I really think that many val­ues will soften and that many “investors” will be squirm­ing or scram­bling to resolve their “Plan B. . As a gen­eral rule, peo­ple will be hap­pier with their real estate than their stock port­fo­lio. And Rob Ford will still be mayor (it’s a trade-off…).

Mike Eppel: Slightly lower on aver­age prices, slightly higher on mort­gage rates and a mod­est increase in sup­ply of homes available.

Barry Cohen: Likely the same place we are now, answer­ing a sim­i­lar ques­tion for the upcom­ing year because much will not have sig­nif­i­cantly changed other than the weather will be cooler or warmer, mort­gage rates up a point or so. The num­ber of sales may soften slightly and res­i­den­tial val­ues in the GTA will have moved for­ward mod­er­ately and not cor­rected. Lastly, hope­fully the colour orange will have gone out of style.

Elli Davis: I expect many more condo list­ings for lease and for sale as the new build­ings come to com­ple­tion, and the “flip­pers” will still be mak­ing a profit if they bought four to six years ago — but per­haps not the big bag of gold that they expected. I see the “house” mar­ket still very healthy, espe­cially in the cen­tral areas, and unless the sup­ply increases dra­mat­i­cally, the price lev­els will stay about the same.They are very high now and feel they will level, not increase very much at all.

Elise Kalles: Slightly higher on aver­age prices, slightly higher on mort­gage rates and a 10 to 15 per cent increase in sup­ply of homes available.

Jerry Ham­mond: The demand will remain strong and prices will increase. Inter­est rates will only increase slightly due mostly to our neigh­bours, the U.S. Our dol­lar must remain low or at par­ity since we are an export nation. And by increas­ing inter­est rates, this would only place pres­sure on Cana­dian indus­try and hous­ing. Hous­ing plays a huge role in stim­u­lat­ing the entire economy.

Garth Turner: By mid-2012, the prime rate will be north of four per cent, hav­ing increased from 2011 by a third. There will be no more insur­able 35-year mort­gages. Real estate val­ues will have fallen in the GTA from year-ago lev­els but not enough to restore afford­abil­ity given the higher inter­est rates. Dis­mayed sell­ers slow to drop ask­ing prices suf­fer long peri­ods on the mar­ket. Buy­ers sens­ing there are more reduc­tions to come, hold back, assured that will hap­pen. Thou­sands of GTA con­dos are owned by reluc­tant land­lords who used to be speck­ers and flip­pers, now failed. Rents are declin­ing and sup­ply is swelling. Untold num­bers of young cou­ples who were told in 2009 and 2010 that buy­ing 5/35 was a no-can-lose propo­si­tion are start­ing to slide under­wa­ter. In North Toronto there is shock and awe. This is not the way it was sup­posed to be. Indebted nou­veau Leasiders bay in anguish, know­ing they missed the mar­ket top. Wealthy Per­sians and Main­land Chi­nese won­der what enticed them to invest mil­lions in a city they thought was immune. And the Post City Mag­a­zines panel, by now soundly ine­bri­ated, watches the sun set over Lawrence Park. One. More. Time.

Sherry Cooper: Toronto house prices will be up, but only by two per cent to three per cent, com­pared to 4.6 per cent last year. This slow­down will reflect higher mort­gage rates and tighter mort­gage terms. Garth has been pre­dict­ing near-term Armaged­don for years now. I do not rec­om­mend spec­u­la­tive home pur­chases, but given that 68 per cent of house­holds like to own their res­i­dence and many more aspire to for lifestyle rea­sons (fam­ily rea­sons, pri­vacy, pride of own­er­ship, means of self-expression and just plain human nature), the Toronto res­i­den­tial real estate mar­ket will gen­er­ate mod­er­ate aver­age gains, with real inflation-adjusted appre­ci­a­tion likely below recent his­tor­i­cal norms. Garth seems to believe that home own­er­ship is sim­ply a finan­cial issue. It is very much an emo­tional issue as well, as the behav­ioural econ­o­mists are prov­ing. In the his­tory of mankind, peo­ple have longed to put down stakes and to cre­ate beau­ti­ful, per­son­al­ized homes. Soci­eties with high home own­er­ship lev­els are sta­ble soci­eties. When the Com­mu­nist Iron Cur­tain came down, fam­i­lies worked hard, saved money and bought homes. To be sure, spec­u­la­tive fer­vour takes over peri­od­i­cally, end­ing in col­lapse. I don’t believe Toronto real estate is at bub­ble lev­els. If prices rise too fast this year, which I doubt, we could be in for a nasty cor­rec­tion, but even then, still noth­ing like the U.S. crash.

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Con­tact the Jef­frey Team for more infor­ma­tion – 416−388−1960

Lau­rin & Natalie Jef­frey are Toronto Real­tors with Cen­tury 21 Regal Realty.
They did not write these arti­cles, they just repro­duce them here for peo­ple
who are inter­ested in Toronto real estate. They do not work for any builders.
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