Speculative Activity Is Being Squeezed Out
A report from the Financial Times on Canada. “Officials at major Canadian banks are issuing assurances of the strength of their mortgage portfolios, in spite of strict government curbs on housing transactions, and dropping prices in big cities, as well as a slowdown in transactions. However, with prices dropping and Canadians largely over-leveraged for their homes, David Madana of Toronto’s Capital Economics noted, ‘Everyone agrees it’s a bubble; now the question is, how it ends.’”
From Reuters. “The sharp reversal in Toronto’s home prices has thrown Canada’s biggest property market into chaos, with scores of buyers suddenly short of money and desperate to get out of deals that looked good just a few months ago. Much of that turmoil is not just down to those who bid at the peak and now wanted to get out of a deal, but also to lenders tightening credit and property appraisers lowering their valuations.”
“‘The big issue is with financing,’ said John Pasalis, president of the Realosophy real estate brokerage in Toronto. Pasalis gave an example of a buyer who expected a C$1 million ($800,000) loan from the bank only to have it cut to C$850,000 days before the deal was set to close. ‘All of a sudden you have to come up with an extra 150 grand,’ Pasalis said. He estimated that up to 5 percent of deals were at risk now, something unheard of a year ago.”
From CBC News. “Whether or not Toronto is in a housing bubble — and whether or not it’s already burst — is a hot topic in the city. But one economist says we’ve definitely popped that bubble, which could make things a bit easier for would-be buyers in the months ahead. Doug Porter, chief economist and managing director of BMO Financial Group, shared his thoughts on the city’s real estate market on CBC’s Metro Morning.”
“Metro Morning: ‘Some people were not convinced there was a housing bubble. Why do you believe there was?’ Doug Porter: ‘For those who aren’t convinced, I’m not sure what it would take to convince them. By any traditional definition, we were in the grips of a full-on bubble earlier this year. Anyone who bought near the peak probably has a bit of buyer’s remorse now.’”
From Better Dwelling. “Toronto is seeing the largest decline in sales to new listings in the country, as sales struggle to keep up with the city’s huge inventory growth. Toronto is coming off of a low for inventory, so numbers are expected to grow. Growth this quickly however, with stagnating sales may soften prices. Over the next few months, expect the market to find better footing, as people play the game of price discovery.”
The Financial Post. “Demand for housing could be cut anywhere from five to 10 per cent because of tougher qualification rules being considered by Ottawa, according to a report by Toronto-Dominion Bank out Monday. The report from Beata Caranci, chief economist with the bank and Diana Petramala, also an economist, takes aim at a proposal from the Office of the Superintendent of Financial Institutions. While buyers may be hoping rising interest rates could trigger a crash, those first-time buyers ‘may be holding their breath for a while’ because prices are likely only going to reset back to the levels of where they were before a year of exorbitant gains, the report concludes.”
“‘Listings shot up in the GTA following the policy measures not because homeowners suddenly became incapable of affording their homes but because speculative activity is being squeezed out,’ they wrote.”
