Toronto Is in a Housing Bubble

I live in Vancouver - which has become one of the most unaffordable cities in the world[1] and am from Toronto.<p>Watching Toronto&#x27;s market explode is like watching a horror movie that I saw take place in Vancouver over the last two years. The politicians, press, and real estate industry are spinning the same stories their counterparts in Vancouver did without providing an even plausible explanation for the rocket ship growth.<p>The key issue with Vancouver&#x27;s market is that prices have become decoupled from local incomes. The same thing is happening in Toronto.<p>In Vancouver, the main driver of decoupled home prices is foreign investment dollars, mainly from China. I suspect the same is true in Toronto because prices there started exploding after Vancouver instituted a 15% tax on foreign buyers in August 2016.<p>If you&#x27;re interested in understanding the key drivers of the Vancouver real estate market, this paper by a SFU professor summarizes the data, provides a sensible solution, and convincingly refutes the tropes that are often provided as reasoning for the market&#x27;s explosion:<p><a href="http:&#x2F;&#x2F;www.sfu.ca&#x2F;content&#x2F;dam&#x2F;sfu&#x2F;mpp&#x2F;pdfs&#x2F;Vancouver&#x27;s%20Housing%20Affordability%20Crisis%20Report%202016%20Final%20Version.pdf" rel="nofollow">http:&#x2F;&#x2F;www.sfu.ca&#x2F;content&#x2F;dam&#x2F;sfu&#x2F;mpp&#x2F;pdfs&#x2F;Vancouver&#x27;s%20Hou...</a><p>1 - where unaffordable is defined as the ratio of median home price to median income.

I just bought a house in Toronto last June. In Etobicoke, quite literally on the outskirts of what you can still call Toronto before entering the suburb of Mississauga.<p>We got extremely lucky with our home purchase. We had an amazing agent that we&#x27;ve known for years, and we had only started looking in February. By April, we had our home purchased, with a June closing. We had one offer fall through, which in hindsight, thank God that it did. This was our first home purchase (and property).<p>We managed to snag our house for $5k under listing, after offering $10k under listing. We managed to avoid a bidding war, as no other offers came in. When we found this home, we moved quickly, making an offer that night, and giving them 24 hours to respond (we extended it to 48 for goodwill). This was a home that was renovated from top-to-bottom, and as an engineer, I&#x27;m happy to say was done properly.<p>With that context, now you know why I say we got extremely lucky. We worked hard to make our own luck, but I can&#x27;t control the opportunities presented to us.<p>Anyway, we&#x27;ve watched many of our new neighbours sell their homes for 6-7% higher than what we paid. One of our neighbours has an open house going on <i>right now</i> and there are dozens of families coming in cars to check it out. It&#x27;s listed $20k higher than what we paid for our home, and it&#x27;s likely to go for $50k above that. We&#x27;ve seen the pictures, and it does not compare to the quality of our home.<p>So yeah, we might be in a bubble, but people are trying to buy. Speculators and investors may be the ones driving up the prices, but I think there really is just that much demand. People want to live here, and they&#x27;ll find a way to pay for it.<p>Personally, I&#x27;m not too bothered by it since I didn&#x27;t buy it as an investment. Sure, I do care about my home value, I want to make some money when I sell in 10 years to move to another home. But that&#x27;s my unfair advantage compared to everyone else: I can live in my home as long as necessary to wait until the market recovers if this bubble were to pop.

Is there any city that is actually managing to provide enough housing inventory these days? SF, London, NY, Vancouver, Toronto etc - all seem to have low inventories.<p>Is it simply that there is a multiyear lag before inventory starts coming on stream, or is there some fundamental reason why these larger cities can&#x27;t provide enough housing?

I own a semi-attached house in Toronto that I purchased last May with my fiancee. I have a few critiques of this article related to the context it places Toronto&#x27;s housing market, and some of the souped-up language used.<p>Why compare the Toronto housing bubble with that in Japan or the US? You don&#x27;t have to look further than Toronto for a direct comparison; [housing prices in Toronto decreased by 40%](<a href="http:&#x2F;&#x2F;www.torontocondobubble.com&#x2F;2013&#x2F;02&#x2F;toronto-housing-bubble-in-1980s.html" rel="nofollow">http:&#x2F;&#x2F;www.torontocondobubble.com&#x2F;2013&#x2F;02&#x2F;toronto-housing-bu...</a>) between 1989 and 1997.<p>Second, a bully offer is not an &quot;aggressively high&quot; offer by definition. A bully offer is simply an offer that is submitted before an agreed upon offer date. He offers no evidence to his argument that houses are going for 6-figures above the asking price.<p>Last, ideally these statistics would have been given in context. Don&#x27;t pull two historical housing bubbles and then compare their growth to Toronto&#x27;s. Rather, pull all fast growth housing markets and compare their behaviour to Toronto&#x27;s. In other words, how often is this growth <i>not</i> a bubble?<p>I&#x27;m 32 years old and consider myself very fortunate to be able to own in Toronto. This will allow my family to live in the city I love. Many of my friends are facing the choice where if they wait and growth continues they&#x27;ll may be priced out permanently, but if they buy into the market they may be sitting on a bubble. There was tons of bubble talk when we bought, but we were more worried about being priced out.

Yes, Toronto is probably in a house bubble. Is it in a housing bubble, though? If doing more with less is the goal here (as opposed to less inflation on houses in Toronto) why are people missing the relative affordability of condos and apartments? A large flat structure with lots of mostly unused land (by percent utilization) is horribly inefficient.<p>A condo costs less to live closer to the interesting things like work and culture and the higher density means the bottleneck resource (land) is utilized much more efficiently. I know there are cultural reasons not to, but to me living in houses is not something we would necessarily ever choose if we started today with a blank slate.<p>I think a world more along the lines of 80-90% green space with a sprinkling of 100+ storey condos in variable sizes and trim levels would be more livable. I struggle to see why one would want a backyard let alone feel entitled to one.<p>I think the relative price of land to median income will increase as population does (pretty easy to assert) and that we should instead just build very high density buildings surrounded by green space instead of engaging in zero sum competition for an unused backyard.<p>We talk so much about AI making web services better as a form of progress but how much of the middle class budget goes to web services? Sure it could make life better in the future but housing density could make life significantly better now.

sigh..take bubble predictions with salt (people are really bad at predicting this stuff) <a href="http:&#x2F;&#x2F;greyenlightenment.com&#x2F;crying-wolf-holding-the-pundits-and-media-accountable-for-being-wrong-about-snapchat-and-web-2-0&#x2F;" rel="nofollow">http:&#x2F;&#x2F;greyenlightenment.com&#x2F;crying-wolf-holding-the-pundits...</a><p>You also have to take into account for the fact the Canadian dollar has fallen 25% to the Greenback since 2013

Someone would be dismissed if they said Manhattan, London, Paris, and Rome are in a bubble. It&#x27;s just accepted that only the rich can buy there.<p>Toronto&#x27;s housing situation is called a &quot;bubble&quot; because it&#x27;s transitioning to a similar, global city status, and a lot of people are having a hard time facing that owning a house there is not meant for them.<p>I live in High Park. In a one bedroom apartment. I see for sale signs everywhere plastered with &#x27;sold above asking!&#x27; labels.<p>The cold reality in Toronto is that it&#x27;s just supply and demand. There are a handful of houses, and a handful of people with the resources to buy them and live in this beautiful place.<p>For the rest, take the GO train.

The rocket ship rise of real estate in the GTA and indeed the entire Golden Horseshoe has certainly been bizarre to witness. I live in Hamilton and commute into the GTA for work. We bought our modest 3 bedroom townhome here in 2015. About four months ago our neighbour (who had a basically identical home) sold their unit for 100k higher than we paid. This week, a comparable home was listed for about 180k higher than we paid. So, in under 2 years, the current market value of our house would have seem to appreciated by almost 200k. This is a solid hour commute (by car) from the Toronto core.<p>So yeah, I&#x27;m not too sure whether to be extremely happy or extremely worried..

The toronto bubble has begun spilling outwards to much of southern ontario as toronto homeowners cash out and move to the smaller cities. Here in Kitchener-Waterloo about 1.5 hrs from toronto house prices leapt 20-30% in the last year, primarily though all cash deals far above asking or assessed value. People flush with toronto cash are over the moon about spending so little on a house (even though it&#x27;s still an insane figure divorced from reality). And they don&#x27;t care what shape it&#x27;s in since they since have more than enough cash leftover to gut the house and redo it.<p>Foreign money being injected into the process isn&#x27;t helping, but I think the real problem in Toronto is unbelievably low interest rates and easy access to mortgages. Families are being approved for loans of such absurd proportions that everyone who has entered the real estate market in the last 10 years is house poor. Even small interest rate increases will make payments unaffordable and the whole teetering mess will come down.<p>Governments have exactly zero incentive to do anything about it, since greater property values means more revenue without the mess of a tax increase. The Ontario land transfer tax isn&#x27;t high enough to stop anyone from speculating, but it&#x27;s plenty to cash in on the situation.

Seems like a bubble when Asians are buying Canadian properties instead of just buying petroleum or cars etc.

So is Lisbon

&gt; With stocks hitting new all-time highs almost every day, global bond yields at or near zero, and Canadian home prices at nose-bleed levels, it seems like everything these days is in a bubble.<p>A photo-sharing app with a market capitalization of 34.69 billion. Yes, it&#x27;s a bubble.

Of course it is. The central bank has inflated.