The Economics Behind The Toronto Housing Crisis

Housing crises are similar to energy crises, but the implication of the former is higher in the socio-economic impact on the people. Speaking of the consequences of Toronto real estate bubbles, it demands everyone to speak out and rise in defense of sanity in the industry. A quick check at real estate sites for low-rise houses. It will show a list of unsustainable prices increase that only speculators will dare to touch. With low-rise houses going as high as 16.5% in the first quarter of 2017 compared to 4.8% in 2012, one wonders if the economy of the Greater Toronto Area has been so good to warrant such sharp rise in its real estate prices.


By implication, any unsustainable sharp rise in the prices of properties is a bubble that takes a little more time to burst. But when the bubble bursts, industry watchers are concerned of the economic implication that will follow. Experts predict up to 90% crash in real estate prices that will go beyond the GTA to affect the entire Canadian real estate market. Using the 15% 2012 real estate price gain as a reference, it says the industry will lose more in 2 years than it has gained in 5 years.


Other industry pundits may not agree with a 90% crash, but their figure of imminent real estate price collapse in Canada is between 40-50%. Mortgage brokers may put up a stiffer defense to ward off the gloom future market naysayers as mortgage activities at Owemanco and other mortgage lenders are already processing the new Canadian stress test which aims at building credibility in the real estate market by short-circuiting excess homeowners’ debt burden that may plague the industry if things should go awry!


Already, the reality of Toronto housing crises is sending jitters into the spines of prospective investors. Whether we agree with the gloom predictions of 90% or 40-50% or we pitch tent with mortgage brokers and realtors to believe that things are not as bad as being painted, thinking like the average investor means there is imminent crash as many homebuyers and investors will stand back to watch how the market swims out of the troubled waters.


With the Toronto housing crash staring everyone in the face, going by recent reality checks, the industry is finally in its real price crash! Toronto ranked top in Global Real Estate Bubble Index among 20 major cities facing housing price bubbles. Although the power of demand and supply is potent in real estate market, more than such power playing out; the fear of not want to lose more money in an unsustainable property market may see a downward trend for the price crash than its appreciation.


Already, industry commentators and various predictions list Toronto as the riskiest real estate market. With as much as 50% increase in housing prices in 2016 with any possibility of making a breakeven for investors right now, the market risks more plummeting in the coming days, and no one knows when the downward spiral may end.


But all hope is not lost as the new stress test for the mortgage market is one of many policies mortgage brokers think will restore confidence in the market.

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