The Housing Bubble

The first of two weekend topics on the realization of a housing bubble. Macleans, “In mid-March, Elijah Joseph attended the Toronto Real Estate Wealth Expo, a jungle of real estate gurus and their 15,000 disciples who paid up to $500 per ticket, only to be told to invest in what is actually one of the worst buyer’s markets in Canada. A line-up of personalities preached that, despite record-high Toronto house prices, now is actually an ideal time to buy. The presenters all had personal stakes in the market, but attendees ignored the conflict of interest, and the event, disguised as a conference and concert, became a full-day sermon on buying real estate as the greatest good.”

“‘Fear will kill you. Fear will drown you,’ said Daryl King, who is selling properties upwards of $8.8 million throughout the Greater Toronto Area and Ontario. ‘Just jump in!’ chanted Inez Kurdrik, a downtown realtor. On the same panel, Brad Lamb, nicknamed ‘the condo king,’ who has built eight high-rises in Toronto, declared, ‘Toronto has become one of the last safe havens in the world.’”

“If real estate were a religion, Joseph would be a believer. He is 24-years-old, and he has devoted his future to erecting properties trimmed with 24-carat gold. ‘I’m looking to build a great big empire,’ he says. ‘There is no doubt. I have a plan. I have a course of action, and right now, I’m kind of looking for a mentor.’”

The Business News Network. “Toronto’s mayor is putting the real estate industry on notice after the city’s real estate board registered another month of scorching price growth. ‘I would hope we would have our provincial government partners look at the real estate industry and just ensure that their practices are not encouraging an even more frenzied marketplace that makes it harder for people to acquire homes at any kind of cost that is reasonable at all,’ John Tory told reporters.”

“The latest Toronto Real Estate Board data showed the average selling price in March surged 33.2 per cent year-over-year to reach $916,567. That marked an acceleration in price growth after the 27.7 per cent year-over-year rise in February that sparked a renewed wave of concerns about housing affordability across the Greater Toronto Area. TREB told BNN the price growth in March was the fastest since 1989.”

“The price growth in March came amid a double-digit rise in home sales. 12,077 properties traded hands in the month, nearly 18 per cent more than in March 2016. ‘Demand is nearly insatiable,’ BMO Capital Markets Chief Economist Doug Porter told BNN via email. ‘Policymakers simply have to take steps to cool demand, with some haste. … We are now approaching the rarified air Vancouver was in a year ago.’”

From CTV News Toronto. “Soaring house prices in Toronto have local and provincial governments scrambling to come up with solutions, but Ontario’s finance minister cautioned Wednesday that there’s no ’silver bullet.’ Sousa also suggested that it was hard to predict the market’s reaction to any government intervention. ‘To what extent any one measure will have a positive impact or negative impact is questionable and we’re still trying to ensure we put nobody in harm’s way.’”

“Both Sousa and the Toronto Real Estate Board have said one of the underlying causes of the soaring prices is that demand for housing continues to exceed supply. The number of properties listed on the market in March was up by 15.2 per cent from the same time last year, but the number of sales rose by 17.7 per cent.”

“Ontario Premier Kathleen Wynne has said that the government is looking at how it can help speed up construction. ‘There are people coming to us saying, ‘I want to build, I’ve got land, but the process is so cumbersome that I can’t build fast enough,’ she said. ‘So it’s not just whether you can build or not, but the availability of supply, so how long it takes to get from purchase of land to actually building.’”

“Ontario Housing Minister Chris Ballard said the government has to be aware of what consequences could arise from any measures. ‘For many Ontarians their house is the biggest asset that they have, they’re looking at their house as something that will get them through their retirement years,’ he said. ‘So, we have to be cautious — at the same time recognizing that for so many Ontarians they feel shut out of the housing market.’”

From Inside Toronto. “There’s a house beside a highway on-ramp in my North York neighbourhood that could be advertised as being ’steps to tow trucks.’ People with Texas plates bought it a year ago, renovated the front, and sold it the other week for $1.7 million, about twice what they paid.”

“There are almost no ‘bad’ houses left in this city. Almost any residence can be sold, and fought over. Two-bedroom condos are selling for what was, a few years ago, the price of a house. And no government we have wants to do anything about it. Why would they? Tax money keeps flowing in. Selling and fixing homes is the biggest thing Toronto has. We know it’s nuts. It’s entrenching the divide between Toronto’s haves and have-nots. It’s jacking rents as owners of condos and houses pay off their investments.”

“Mayor John Tory met the city’s building and real estate and rental industries last week to show, he said, ‘a deep concern’ for those finding it difficult to live here. He emerged, repeating there would be no ‘eureka’ moment, no magic solution, no risky measures to imperil the gushers of money.”

“People say major bidding wars engineered by agents drive prices up. The real estate people acknowledged the rules on that are ‘fairly weak.’ Talk to their regulator. My brother is renting a North York house from a man in China who bought it a year ago. Another brother was just outbid on a house by another out-of-country investor in Bloor West Village. Half the city is rich on paper, and half is either trapped in ancient rent-controlled apartments or paying whatever rents the market will bear.”

From News 1130. “With the average price of a home in Metro Vancouver now topping more than $900,000, BC’s New Democrats are promising to take action to make housing more affordable. That includes stronger safeguards against the illegal dumping of cash in this province. Housing Critic David Eby says, if elected May 9th, the NDP will set up a task force to investigate money laundering and tax evasion. ‘buying luxury properties through numbered corporations and offshore trusts.’”

“He says he doesn’t understand why the Christy Clark government hasn’t already taken action. ‘We have had so many red flags in our real estate market about the source of funds, who is actually buying property and where the money is coming from…. Between the tax avoidance, allegations of tax evasion and links to criminal conduct –both locally and internationally– I do not understand why this provincial government still refuses to delve into these issues.’”

From Common Ground. “The provincial government has jurisdiction over election rules for both the province and municipalities. Here in BC, the wild west of campaign fundraising, provincial and municipal campaign finance rules are currently among the least accountable in Canada. This has been a huge problem for decades and will not change until the province takes action. The British Columbia provincial election on May 9 brings an opportunity to raise the issue of big money in politics and campaign finance reform.”

“Large donations and cash for access to candidates (often from vested interests) are standard practice with multi-million dollar campaigns. We are becoming the equivalent of a banana republic as globalized capital increasingly influences our governance.”

“The Vancouver Sun reported that, from 2005 to the first few weeks of 2017, of the corporate donations to the BC Liberals, the largest group among the top donors are property developers, with 21 of the top 50. Condo marketer Bob Rennie was the BC Liberal’s head fundraiser up to January 2017, leaving the party well funded for the May 9th election. Rennie has also been a prominent supporter and fundraiser for Vancouver’s ruling party, Vision Vancouver and Mayor Gregor Robertson.”

“Property developers seem to have significant influence on both civic and provincial policies. Land use policies favour dense transit-oriented large scale market development of investment luxury pre-sold condos that are often left empty. These tower developments are serviced by expensive, publically subsidized infrastructure. The real estate market has become disconnected from the local economy.”

“Recently, former Montreal mayor Michael Applebaum was sentenced to one year in jail on corruption-related charges. The Globe and Mail reported that, during the trial, former aide Hugo Tremblay testified he led developers and businessmen to believe their projects would be delayed or not approved unless they made a supplemental cash contribution that was then split with Applebaum.”

“In this election, it is critical to put pressure on all parties and candidates to seriously commit to campaign finance reform to stop the current practices that breed systemic corruption. Only the provincial government can change these rules for both BC and the municipal governments. For the sake of democracy, the people of BC deserve better. A change of government would be refreshing.”