Why Condo Crash Is Not Going to Happen ?

According to Globe and Mail, Toronto condo market is doomed.

Toronto’s soaring condo market ignites fears of a US-style crash

Historically low interest rates and financially healthy banks eager to lend have spurred Canadians to shop for houses and condos. So builders built.

Prognosis grim for Toronto condo investors

Warren Buffett is fond of saying that “you never know who is swimming naked until the tide goes out.” Well, when interest rates start to climb, Toronto’s condominiuminvestors may be about to get a lesson in the perils of swimming in the buff. Bond …
Here are what those disagree with Globe and Mail (those with “vested” interest in Toronto Condo? ) gotta say …


Hands up all of you that have seen this kind of story ad nauseum in the globe. Report it long enough and it may come true. Just like a stock market decline.

Putting aside the issue that the condo market in toronto or vancouver for that matter is not the Canadian real estate market as a whole, it’s a completely different environment than that of the u.s. circa 2007 with no money down with non recourse no money down mortgages given to buyers with no income.

Is the condo market going to cool off? Perhaps, but I see on an ongoing need for younger singles and couples to locate in the city where the action is and that will fuel the demand for some time to come.


Could the headline be any more inflammatory??? Even if there is a pullback it will have no correlation to the factors which caused the US real estate fiasco. Fraudulent lending practices were at the heart of their meltdown. I have not heard of that happening here.

RE market corrections happen and will happen again.

Canadian Moxie

Well said, Toast. It’d be nice if the media stuck to facts rather than inciting panic.


Newspaper articles citing soaring condo market igniting fears, ignites fears of a US style crash….

How many times must we hear about this without it happening???

C’mon G&M, you’ve been reporting this for 5 years now!! How much of those 5 years has been fear mongering.

I mean, keep publishing it enough, and eventually it may come true.


In order for this to happen the interest rates will need to jump by about 5 to 7 percent. A gradual and controlled climb will yield very predictable and favorable results.


I thought I read this article before in 2008 – or was it 2009? – or was it 2010? – or was it 2011? – or was it 2012?


If you keep writing articles and saying that it’s going to crash, it eventually will.
It’s the fear mentality that leads a crash as much as tangible supply and demand forces.


Interest rates are starting to rise. but a crash will happen a few years after the big rise, which is when the US economy improves such that the fed will ease off on QE. Stocks will drop in the short term, as they have recently, and may drop more, but will ultimately recover as macroeconomic conditions improved especially in the US. the condo market will catch many short and medium term investors with their pants down as they can’t pay their mortgages or realize that with the supply pressure forcing rents down and escalating carrying costs, it is a losing proposition, on top of capital loss. Say what you want about wealthy immigrants coming here but TO is not the only city in the world where wealthy immigrants flock to. Immigrants are now buying up property in the US which is a much better deal.

Disclaimer: I myself own a property, bought in 2010 at the height but this is the way things will unfold. I will never invest in real estate now, even though RBC says I can afford to buy 10 investment condos.

No more taxes

Seriously , if you think rates are going to go up in the next ten years you better go back to university.


As far as real estate being a good investment, median condo prices have only increased by 25% since 2009, conveniently excluding carrying costs. Buying the S&p 500 in 2009, your investment would have increased by more than 100%. And if you buy stocks in broad sectors your carrying costs would’ve been minimal but even at 0.17% MER an index fund is a much better bet than condos.

Jay from Canada

Low vacancy rates and restrictions on available land to build. There is no reason for a crash.
If those factors change there will be a correction.
Apartments in the downtown core usually sell at a premium.


The G&M prints the same article every six months its seems. I’ve read the same thing for the last five years. Not to say a crash can’t happen but how many times can a paper predict this and have it not happen? Just sayin

Master of my domain

They saw a downturn in 2008. But the federal government stepped in by increasing mortgage insurance from $250 billion to just under a trillion, lowered standards (you can qualify if you spend 42% of your pre-tax income on debt payments) and increased incentives (tax credits, RRSP withdrawal limits). At the same time Carney, lowered rates.

Flash forward to 2012 and Carney this time started using QE @$1 billion per month to lower mortgage rates (5 yrs at 2.99% anyone). End of 2012 and rates have risen so sales slow. In February, 2013, Carney increased QE to $3 billion per month and rates again fell and housing rebounded.

I did not predict this level of intervention. I would never have believed Flaherty would allow total mortgages guarantees to be 40% more than the national debt. I did not predict that Canrey would not only stand pat on rates even when CPI exceeded 3% but also use $25 billion in QE (to the end of May) to continue to push rates lower.

Without this elvel of intervention, the market would have fallen. Maybe the G&M never predicted this either. And maybe you did?


Is this Groundhog Day? Same story on repeat.

Liberty Village may suffer but the prime spots will prevail.


If you you predict a crash, over and over again, eventually, it will probably happen and you will be right. The hysterical predictions don’t help.

Most markets get overheated, and a price adjustments will follow. and whether it is going to a soft or hard landing is inconsequential, so if your assets are under water, you will be losing money. The soft landing won’t feel as bad because it will be more gradual. At the end of the day, they both brutal, if you are the bag holder.

Gosh this sounds like something Chauncey Gardner would say.


Times change. More and more people have decided they don’t want a 2500 sq ft house in the suburbs with grass to cut. They only use 1000 sq feet anyway. They want to give up sq footage to be closer to work and closer to the action. All the suburbanites are on here, certain of a crash because they just can’t believe everyone isn’t exactly like them.
What would make more sense to you ….
500k in Milton …. an hour to work and again home on a good day, just in time to shovel the snow or cut the grass with a great shopping experience being outlet malls with Walmart and Target stores 1/2 a mile from each other, and it still takes 15 minutes to get from one parking lot to the other. Entertainment is restricted to a choice of movie theatres.
500k in dowtown for 1000 sq feet, all of it used, minutes to work on public transit, no home maintenance and your shopping choices and entertainment options are endless.

Track Racer

Overbuilt and lots of empty condos, no problem. Any defaults and CHMC can rent them out as subsidized housing through the City of Toronto. That would solve the long waiting list for public housing.

(Sure. That’s your money at work.)


A 2 bedroom condo does not cost anything like $500K outside downtown Toronto and a handful of neighbourhoods very close to downtown Toronto. Condos in the suburbs, where a large percentage of the population works, are much cheaper. Furthermore, rents for condos are rising quite rapidly. All this talk of a condo crash is exaggerated, the real reason that there are so many condos being built in the GTA is because of the Greenbelt Act, the province has severely limited the supply of new low rise housing (very few new subdivisions are being built), the predictable result is that single family house prices are outrageous ($500-600K or more for a house in a nice neighbourhood anywhere in the GTA) and people are forced to live in condos.


The real estate market is mixed and there isn’t one rule or prediction that will hold true for all or even most situations.

The condo market is highly problematic. It’s not reasonable for developers to continue to throw up cheaply made lifestyle units, create more traffic and pedestrian congestion, and add nothing to the city. How about adding some useful ground level public space?

It’s not reasonable to let foreign investors drive up the price of real estate. If you are really not a citizen of the city, I have no problem charging you a higher property tax rate.

But at the same time, if there really are too many investment condos, how come it’s so hard for renters to find an apartment in the city? For this reason alone, I don’t think housing in Toronto is dramatically over-built. It just isn’t thoughtfully built.

Raise requirements for developers to put up buildings that will last and add something back to city life. Limit and profit from foreign ownership by charging more in property taxes.

richmond anon

In Vancouver, many condo units purchased by foreign investors sit empty, rather than being rented out.

(Bought with “stolen” free money ?)


There are 55,000 condo units under construction in the GTA to be competed between now and 2016.

Toronto receives about 75,000 immigrants a year. All of these folks require a place to live. High immigration rates are fueling the rental and condominium market.

Rental buildings haven’t been constructed in this City for years. Investors are supplying the rental market. Rental property has become a long term investment that delivers cash flow in retirement.

70% of Canadians have no employer based pension plan. 91% of private sector workers have no employer based defined benefit pension plan. Returns on RRSP savings are dismal. CPP benefits averaged $6144/year in 2011. Rental property has become a desireable investment for those saving for retirement.


When the condo market goes so will the ponzi scheme called Housing Market. Many of these posters do even know that houses built in cities like Brampton, Woodbridge and etc are built over wet lands and creeks. I already been told there is issue with water in these area that the media will never talk about.


The solution to this problem is simple: place restrictions on non-residents holding real estate. Limit real estate ownership to Canadian citizens. This will kill the condo bubble overnight.


I’m sure the media has already pre-written the articles blaming Rob Ford for the crash…


We were planning on moving to Toronto but decided against it after researching the political unrest in the city. It seems almost bizzare that a mayor and his brother can set up a weekly sunday morning infomercial and have their drug dealing friends call in with loaded questions. What is even more bizzare is a large percentage of the locals still support this type of insanity. These are not the type of people we want as our neighbours.


Trust me, the mayor’s supporters don’t live in downtown condos. Like the mayor, they despise the downtown and it’s residents. You’re safe here. And despite the mayor, it’s actually getting even better.


You are absolutely correct. People in the Toronto suburbs are greedy and selfish. They don’t want to pay taxes and want everything free.


What a stupid reason not to move.


Sorry dclark – we’re everywhere. I live downtown and will vote for him again in a nano second – provided of course there is no one else with the same agenda as his.

Ben – look at the amount of people moving to Toronto… it all becauase of Rob Ford!


“The political unrest in the city”??
The mayor was elected and, so far, their isn’t proof to charge the mayor, or his brother with any drug crime. I’m glad you didn’t move to TO, because the last thing it needs is more hectoring socialists who want to keep the city in debt forever to fund their pampered lifestyles.


Naaah Canadians are just way to smart to let a crash happen. Just look at all the smart people we have such as, well, ummm I mean if you…. uh well I know we have some I just cant remember any right now.

Glenn Fiddich

The Mop is fond of running scare stories now. Having failed to scare us all into ditching our cars and getting on bikes to save the planet. One week it’s the oil industry which will disappear, next the condo industry. But there is one industry in its death throes..Print Media. How about a story on the latest round of Globe layoffs.


It is a rather stupid headline. Is the purpose to give New Yorkers a good laugh?

Meanwhile in New York there is one tower that sells condos for 6000.00 per square foot.

USA is climbing out of the real estate crash,and the Globe and Mail is trying to start one?


3:14 PM on July 3, 2013

There is no such thing as a ‘soft landing’ for those who will not be able to afford higher mortgage rates.

This problem has a double sword effect. When mortgage rates increase and they will, house prices will also drop in value. For example, a house now selling at $400,000 with a 3% mortgage rate will more than likely fall in value to around $350,000 when rates increase to 6%. This means that those trying to get out of the market when rates increase will also take a loss on their sale.

Imagine you bought this $400,000 house at 3% mortgage rate – now the mortgage rate goes up to 6% – your interest payments have gone from $12,000 annually to $24,000 annually. You can’t afford it so you try to sell – now your house only sells for $350,000 due to the higher mortgage rates and your real estate agent charges you a 5% commission to sell this house or $17,500.

The bottom line is that you will take a bath and lose at least $67,500 on your initial purchase.

You know who wins – right – Real Estate Agents.

Keep renting and put food in your fridge, travel and enjoy yourself.

John Johnson

One however needs to take into consideration the risk of interest rates going from 3% to 6%, which is an interest rate we have not seen in a very long time. More than likely interest rates may increase to the 4 – 4.5% range and your numbers in your example will be significantly less. Your example is a prime example of fear mongering.

Stephen Saines

In all fairness to the NYTimes, I think Tal was quoted out of context. This article states:
[“There is no question that the housing market in Canada is overshooting,” said Benjamin Tal, deputy chief economist of CIBC World Markets. “Now the cocktail party conversation in Canada is: ‘Will this lead to a U.S.-style crash?'”]

He meant the *Condo* Market.

Here’s what he is also on record as stating June 5 in this newspaper:

[ Prices have held up so far because, as demand has fallen, so has the number of homeowners listing their properties for sale, said Canadian Imperial Bank of Commerce economist Benjamin Tal. “I think we will still see prices go down in the next year or two, and it will probably start in the condo market.”
Mr. Tal said that while he agrees with the OECD, there may not necessarily be a housing crash. “I do not see smoke. I see a boring, slow process over five to seven years that will take fundamentals and prices back in line.”]
A soft landing for housing sales, but prices up in the air

Watch to see a correction published by the NYTimes and Globe on the matter. To confuse the Condo Market with others is to truly screw up remedial steps, which are already under-way, and apparently working.

Stephen Saines

Article states:
[Low vacancy rates in Toronto make it easy for condo owners to find renters,]

I find a number of claims in this article questionable. I thought the same when reading yesterday’s Globe article on condos, until I Googled the CMHC to find that Toronto is in fact in the middle of Cdn cities for vacancy rates.

Some of the info in this article is already dated and now incorrect.


Ontario as a province might not be in the best shape. But the GTA looks like it is still growing at a relatively robust pace. There are still a lot of job openings here and restaurants and shopping malls appear to be as full as ever. I’m sure if we separate out the stats regarding the GTA from the rest of Ontario, we’ll see two radically different pictures.


Another story allegedly about Canada but really about Canadians comparing themselves to Americans–Canada’s national pastime. Don’t worry Canada, Mike Holmes will be along shortly to rip out your drywall and studs after your incompetent builders put up yet another leaning tower of stupidity. Just please don’t come here, we don’t want you.


Most of the condo buyers today in the areas spoken to are Liberals (silver spoon socialists) and gays. I hope all of this goes down the toilet and the bunch of them lose their shirts. I’ll just sit back and laugh.

Go HERE for those who think condo crash is imminent.

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