No bubble trouble to report here
That slight slowdown in demand is due to variations in business cycles — and nothing more
By Hugh Heron – Toronto Sun
The cover of the July issue of Toronto Life features a house in Toronto that sold for $151,000 over the asking price, and the headline of the article inside is “Bubble Trouble.”
The article goes on to point out different Toronto neighbourhoods and offer “risk assessment” for them. Whenever I see things like this in the media, I just shake my head. Since I came to Canada in 1967, our industry has gone through a lot of ups and downs.
We experienced a true bubble in the late 1980s and early 1990s, when mortgage rates skyrocketed and speculators flooded the market. Despite the fact that conditions are very different today, people continue to compare our current success in home sales to that time. I don’t understand why.
The news is always filled with predictions by “experts” of all kinds. Time and again, a lot of these people are proven wrong. Years ago, we were assured that we would never see single-digit mortgage rates again — and here we are with the lowest rates we’ve had in decades.
Of course, rates will go up again; that’s how the economy works. This business is cyclical. Home builders understand that, and so do the lending institutions we deal with.
In a recent column, I pointed out that interest rates rising a bit is not the end of the world. And homeowners who ride out the lows do very well in the long run.
The one prediction that has come true, is that this year we would return to a normal real estate market — and that’s exactly what has happened.
Are there investors buying? Sure — and many opt for condominiums. Those who purchase for that reason understand the risk involved, and frankly, they help with Toronto’s rental accommodation situation.
But there is still a huge number purchasing homes and condominium suites to live in them. And that is most likely the best investment these people will make in their lives.
Prices are only going to go up, especially when you consider that we’re running out of places to build in the GTA. There are protected escarpment areas, and the waterfront is filling up.
Condominiums are key in accomplishing the intensification the provincial government calls for, and there are limits as to how much can be built nowadays.
Right or wrong, it’s reality. And remember that new homes bring in a lot of tax revenues to municipalities. One thing I’ve learned since coming to Canada is that immigrants arrive here mainly for a better life for their children, and because they dream of home ownership.
And remember, the Toronto area is still undervalued on the world stage. My crystal ball may not be perfect, but I see there always being a demand for housing in the GTA.
This is the most important municipal area in Canada, which is why nearly half of the 250,000 immigrants to Canada each year settle here.
We also have a banking system that is stable and conservative, and has saved us from the extreme problems the United States has experienced over the past few years.
The reasons why what we’re experiencing today is not a “bubble” are many and varied, and sensationalizing the negative in the media is counterproductive.
I’ve said it time and again — we create the economy. This black-and-white thinking has to stop in favour of a more balanced outlook.
Now is a terrific time to buy a new home.
There is tremendous choice out there and a lot of competition, which is always good for buyers. Even if prices rise, our homes and condos are still among the most reasonably priced real estate in the world. Instead of criticizing home buyers‘ enthusiasm in the market, we should be celebrating it.
I’m one of the “eternal optimists” referred to in the Toronto Life article. And it’s the optimists in our world who continually go forward and get things done.
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