The three major Toronto media headlines right now include the Obama Romney Ameri-geddon Election, the socio-economic and physical devastation by Sandy Frankenstorm which left New York and New Jersey in a watery upheaval (Sending NY and NJ + E-One Impacted In The Caribbean Much Empathy) and, in the top spot, the apparent and imminent collapse of the Toronto real estate market. Basically, The End of the World As We Know It is getting top billing!
Certainly, standing on the Canuck side of the border, we’re as curious-as-witnessing-a-car-crash on who America will vote in to navigate the end of its empire, assuming climate change and global warming doesn’t do it in first (and the rest of us too for that matter). And when it comes to real estate, we’re perched-on-the-edge-of-our-seats-with-a-raised-eyebrow watching a condo market sputter when it was explosively firing on all cylinders just last Spring. So is this the beginning of the end? Is there any truth to these depressing forecasts and occurrences, or are the hyped headlines nothing but scare tactics and fear mongering to recruit readers and subscribers?
Not since the global financial calamity of 2008 has the tide turned so quickly on Toronto’s real estate market. Furthermore, it’s being exacerbated by the intensity by which the media is propagating the doom and gloom. Every day there’s another article about all hell breaking loose to the point where everyone is now spooked. The media has effectively condemned the condo market, and buyers are ensconced in fear and unwilling to act at all. Click HERE to read “Where Are The Condo Buyers?” which I posted just four days ago that offers more insight.
On Friday the Globe and Mail Report On Business published an article called Toronto Home Sales Down 7.1 Per cent In October. The headline is true, but it also reveals that sales activity was better than September and that house prices are continuing to rise. Yesterday The Toronto Star published an article about the drop in condo sales in October, calling it Condo Hit Hard As Markets Level Off, while the body of the article clarifies that the freehold housing market remains strong. And Canadian Real Estate magazine published an article called Condo Cap Rates Fall Below 4%. However, any investor long ago accepted a 3 to 4% cap rate when purchasing a downtown condominium. So why is it worthy of a headline now?
There’s no arguing the statistics speak for themselves. For true accuracy you can click HERE to see the Toronto Real Estate Board sales stats throughout the city for October for all housing types.
Yes, the market is changing, but anyone who has been following the Toronto market always knew, realistically, that the momentum and price gains of real estate couldn’t sustain its record-setting pace in the long term. A movement into a balanced market, which hasn’t existed in Toronto for nearly fifteen years, is our very best option. However, is it possible for a balanced market to come in for a soft landing without a few bumps along the way? There was a brief, yet informative article in the Globe and Mail last week called “Worries About Consumer Debt, U.S..-style Housing Crash Overdone: Report“. It asserts that Canada isn’t going to experience the calamity that much of the United States suffered through. I agree, but there still remains the concern about the country’s economic performance highlighted in an article in yesterday’s Toronto Star called “Earning News Fuels Concerns Over Economy“. And there’s the issue about how high Canadian real estate values have spiked relative to inflation, which history shows to be problematic. Here’s a well-written article in today’s Globe and Mail called “Will Inflation Keep Boosting House Prices? Don’t Bet On It“.
If the media keeps positioning the housing market as one of doom and gloom, then we’re definitely in for a bumpy ride, which is what’s frustrating me. As a realtor actively engaged in the real estate trenches, the current Headline News isn’t really new to me, or my associates. We’ve been predicting a change in the condominium market, and how this might impact the freehold housing market, for some time now. You can check out Urbaneer’s Real Estate Forecasts to read our past insights and recommendations.
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Tales From The Real Estate Trenches