A house is seen for sale beside a house that is sold, in Toronto on June 15, 2020.
Cole Burston/COLE BURSTON/THE GLOBE AND MAIL
Flipping through The Globe and Mail’s real estate section these days is a boggling experience. This Friday’s showed clear signs of madness at both the high and low ends of this season’s red-hot market. A four-bedroom, “neo-classical” mansion in Oakville, just west of Toronto, recently sold for $18-million. A three-bedroom townhouse, also in Oakville, sold for $1,050,000, $250,000 “over asking.” A little Toronto bungalow that went for $550,000 as recently as 2011 is on the market for $1,125,000.
Every sign points to the kind of frenzy that periodically overtakes Canadian housing. The average price for a Greater Toronto home passed the $1-million threshold for the first time in February. The selling price of a detached house jumped 23 per cent compared with a year earlier, reaching $1,371,791. Nationally, the average home price in February was a record $678,091, up 25 per cent.
The mindset that takes hold at times like this is familiar. Seeing prices soaring, buyers rush to get into the market before they miss the boat. Speculators jump in after them, hoping to flip properties and make a few hundred thousand bucks overnight. All this demand pushes prices up even further, which causes more panic buying at stupid prices.
The fever rages until something happens to put the fear in buyers – a downturn in the economy, a government announcement about mortgage rules, an uptick in interest rates. Prices plunge and the opposite mindset sets in: The sky is falling, time to sell, sell, sell. It happens, to various degrees, for every kind of asset, from oil to gold to stocks.
Somehow we have managed to convince ourselves that Canadian homes are different. Their prices have risen for so long that it seems they must keep on rising without end. Haven’t a whole series of international agencies and experts predicted a drop in the market, only to be proven wrong again and again? Didn’t Canadian Mortgage and Housing Corp. itself say prices would fall by up to 18 per cent in 2020 because of the pandemic, just to see the head of the CMHC offer an apology later for the mistake? The economy is about to come roaring back when the plague lifts. Interest rates are at rock bottom, making mortgages easier to carry. What could go wrong?
Real estate boosters will tell you that houses are different from other things we invest in. People live in them, you know! You can’t live in your art collection. They will tell you that Canadian homes, in particular, are capable of defying the laws of gravity. The streams of newcomers flooding into the country mean that demand for housing is sure to remain strong, and high demand means high prices.
There is some truth in that. Canada’s big cities are booming and the country’s future is bright. Rising home values are in some ways a sign of confidence and optimism – good things, we can all agree.
But, in the end, houses and apartments are just a commodity like anything else, subject to the same peaks and valleys in price that come to them all. What goes up must eventually come down. To believe otherwise is to succumb to the very human tendency to think that things will keep on going as they happen to be going at present. They don’t.
Both the United States and Britain suffered a collapse in home prices at the end of the 2000s. Toronto’s market crashed at the end of the 1980s (about five minutes after I bought my house there, as it turned out). Don’t ever think “it can’t happen here.” It has and it will.
When is anybody’s guess. No one really has a hot clue. Not the real estate board or the Bank of Canada or the economists who issue earnest predictions in the media. But count on it. The Wikipedia page for Real Estate Bubble dryly lists the Canadian bubble as “ongoing currently.”
Just look at the story of a little house in Leslieville, a trendy district on the east side of downtown Toronto. The internet loved this one. The yellow-brick, two-bedroom shoebox went on sale March 11 for $999,900 and sold four days later for $1,460,000, nearly half a million over asking.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
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