Toronto House Price Bubble Goes Nuts

Tyler Durden's picture

Submitted by Wolf Richter of Wolf Street

Based on fundamentals? You gotta be kidding.

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%!

That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled!

The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422.

Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February. And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March.

Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success.

Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble. And the Bank of Canada, which has been fretting about the housing bubble for a while – always couched in its very careful terms – refuses to raise rates. Everyone is talking. No one dares to do anything real about Toronto’s house price bubble.

In Toronto, according the real estate folks, it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing, really. So TREB President Larry Cerqua is glad the efforts to tamp down on it all have not come to fruition, in part due to TREB’s vigorous lobbying:

“It has been encouraging to see that policymakers have not implemented any knee-jerk policies regarding the GTA housing market,” he said in a statement.

“Different levels of government are holding consultations with market stakeholders and TREB has participated and will continue to participate in these discussions,” he said. “Policy makers must remember that it is the interplay between the demand for and supply of listings that influences price growth.”

Singing a similar tune, Jason Mercer, TREB’s Director of Market Analysis, explained the basic supply and demand problem:

“Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings,” he said. “A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance.”

And he told policy makers to tread carefully: “As policy makers seek to achieve this balance, it is important that an evidence-based approach is followed,” he said. This is a gravy train, and it must be allowed to speed on until the last cent has been extracted.

It doesn’t take a genius to figure out that this will end in tears. What we don’t know yet is when it will end in tears, and whose tears it will end with. But we already know: When it does end in tears, real estate organizations will first be denying it, and then they’ll be clamoring for a bailout of their stakeholders – so it will end in the tears of others.

Even the big Canadian banks are fretting. “Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal Chief Economist Doug Porter warned clients. But the bubble’s deflation would push the city into a fiscal and financial sinkhole

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hardmedicine's picture















Cognitive Dissonance's picture

Nobody really talks about why these housing bubbles are not discouraged until they are. For the local taxing authority, this is all a windfall now with stamp taxes/transfer fees and later when property taxes go up up up.

nope-1004's picture

Those hoser Canadian banks are gonna be toast, eh?

But lets not talk aboot it.....  :)

Cognitive Dissonance's picture

Just suspend mark to market and all will be right as rain. Just like the US did back in 2009.

All fixed.

Luc X. Ifer's picture

Who is going to tell me this is *NOT* Ponzi?!

atomp's picture

Me. This is NOT a Ponzi. This is "money printing" on a global scale. Global Weimar in slow motion, manifesting itself in equities and real estate for now. Coming to a grocers near you soon.

Déjà view's picture

Press 1 for Mandarin...2 for Cantonese...3 for Pitz...4 for Hindi...5 for English...6 for French...7 for Español...

$hì Señor...mixed nuts!

Itinerant's picture

Nobody can argue with the logic of supply and demand in a free market.

People are exchanging a million dollars for a house of their own free will. Eveybody gets what they want.

I'm sure all the money has been saved from current employment, so there's no problem there.

And all the people putting down a million dollars will always prefer the house to the money, even if the house is only worth 250,000 a few years hence.

Womb Service's picture

No, sadly they won't. This entire clusterfuck is backstopped by the Canadian taxpayer, via the underfunded CMHC. I think they call it moral hazard...or something.

divingengineer's picture

Here they come to fuck up your town.
You'll have to live under a bridge so the chinamen can launder their filthy stolen money.

zzzz88's picture

do not blame chinese. blame all the central banks, including chinese central banks

divingengineer's picture

I'll blame them both.
Plenty of blame to go around.

Laowei Gweilo's picture

lots of people talk about it though

heck, the BC government even says its constant surpluses (the only 'rich' province in Canada post-oil crash) are because of the housing boom


no one cares .... cuz the only people that vote are old people, and they are just fiiiiine seeing their real estate double/triple so they can sell and then retire to the island or the Okanagan. 


Right in the middle of over 8.5 million people in the land of lake effect snowfall in the winter, and summer inversion layers that make Beijing look like Rocky Mountain high clean air quality. 

Let the fucking refugees take it all.

Toronto was a shit hole in the sixties with less than 2 million people in Metro Toronto area.

Fucking zombie apocalypse if anything goes wrong with reality.

I left for the west coast in 76, and never looked back.

Fuck urban life in general - totally unsustainable, even if you have the coin to burn.  

radbug's picture

Tell me all about it! Sydney's up 19%, Melbourne's up 16%, as well!

anarchitect's picture

Australia is insane across the board.  Canada, mostly in Toronto and Vancouver, at least since oil went south and Alberta corrected somewhat.

Regardless, I hope all of the people involved in these feeding frenzies get their heads handed to them.  It gives the entire Canadian market a bad name, even though most areas are not unreasonably priced.

CheapBastard's picture

In 2001 I looked a place in Darling Harbor for $280,000 USD. That same place recently sold for $1.68 million USD.

It's crazy over there. I am very sorry I did not but it but people told me even then it was overpriced relative to local wages. it was also hard to even find realtors in those days.

Who could have foreseen these countries would open their borders wide open to a nation (China) that printed Trillions out of thin air and then exported it across the globe?

risk.averse's picture

Not just China printing. The Fed has a case to answer, of course.

BTW, what is the true value of their currency??? Hey, maybe the Trumpster knows? Maybe he and the Chinese prez can toss some numbers around over canapes at Mar Lago. Yeah, right...don't hold your breath. Chinese using all their newfound "wealth" to buy the world. Who uses military force these days to invade? That's so 20th stupid. The chinese ate doing to Canada and to Australia what they did to Tibet -- minus the use of muscle. Just flood the target with your people. If the locals complain then call them racists and xenophobes.

Can't just blame the Chinese. A lot of this excess liquidity is courtesy of Bubbles Bernanke and his game of QE to infinity and beyond!!

Lore's picture

Exactly. This is symptomatic to some extent of Chinese dishoarding of UNITED STATES t-bonds.  Funny how that detail gets sidelined. 

However, the market is considerably more diverse and corrupt.  Click the link to the CBC documentary that I posted below.  The underlying dynamic reminds me of paper trading on the COMEX. 

Lanka's picture

Chinese hot money fleeing China.

Houses Depreciate's picture

.... and not a buyer in sight. 


I can ask $50k for my 10 year old Honda Accord but where is the buyer at that price?


So it is with all depreciating assets like houses.

Spungo's picture

Houses depreciate but land does not. Condos generally don't depreciate either because the monthly fees go into maintaining the building, so the capex generally covers the depreciation.

Sam Spayed's picture

Toronto is slightly more interesting than its US neighbor, Buffalo NY.

Houses Depreciate's picture

Todays Toronto is tomorrows Buffalo.


Prices have a long way to fall.

Lore's picture

My thought as well.  Toronto is a Have-Not city in a Have-Not province run by a Progressive-Left government.  How is that not a recipe for disaster?  In 10 years, those subsidized "densified" rathole apartment complexes are going to be No-Go Zones. 

CBC Doc Zone aired a pretty good documentary about the pathological Toronto market:


"I think there is a real problem with these monolithic buildings that are sold to foreigners or to speculators. I think the governance is going to be a nightmare.  I think they are potentially going to become slums." - Diane Francis

Herdee's picture

And borrowing on the homes fr boats and cottages and conning old people into taking reverse mortgages.

Raffie's picture

Them muzzies LOVE houses in Canada. They convert them into mosque to make and carry out terrorist plans.


Bill of Rights's picture

Yellen " buy assets "

hardmedicine's picture

just sold my house for the asking price............ came in at full price in 3 days.......... in north texas


Houses Depreciate's picture

My counterpart in north Tx just slashed his price another 15% and still no interest.

CheapBastard's picture

Texas has insanely high property taxes. I read west of Houston prop taxes are in the 3.5% area. That's too high for most retirees and working people.


Houses Depreciate's picture

"retirees and working people"

That about covers everyone. 

Donald J. Trump's picture

Not really.  There's what, close to 100 million people not in labor participation?  Maybe those are the ones that can afford the increases.  I notice in the supermarket the ones buying lobster and beef tenderloin don't work, nor do they look retired.

bluskyes's picture

Gotta get me one of those snap cards

chosen's picture

Texas has no state income tax.  The government has to get the money somewhere.

hardmedicine's picture

I bet they are in the bigger housing market.  mine was a 3/2 under 200K

those houses are in very very short supply..... i hear the lowest supply in 50 years


Houses Depreciate's picture

There is no "short supply" my friend. Not will tens of millions of excess, empty housing units out there.

The Count's picture

The time to sell out is when it looks like it will go up forever.

squid's picture

"The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422."

Nothing to see here, the economy is BOOMING in Canada, Justin is off to yet ANOTHER fag parade.....what could possibly go wrong.




Oh Canada indeed.



Mtnrunnr's picture

It's got a ways to go yet. Asset prices are not allowed to drop

Houses Depreciate's picture

Are you sure about that? Prices are falling elsewhere.

Anarchyteez's picture

Not here in Seatthell.

I know a realtor that sold a house yesterday...usually a happy event. NO MORE. Husband wife and agent almost in tears. They closed on a mold infested 550k shit box!

Good times here. Not.

Lanka's picture

Fiat currencies are racing to the bottom.  In nominal $, the properties may eventually be increasing.

Md4's picture

"... it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing"

These motherfuckers truly have lost their minds.

It's time to end this, all over, however it has to be done.

chosen's picture

I rikee buy youl house.  My ruggage is full of dorral birrs.  The money iss all irregal, but we no terr nobuddy.  Ah, so.