While yes, there is a serious bubble going on here in Toronto, it's also important to note the complex causes.
Canada has something like 240,000 immigrants per year, and half of them come to the Toronto region- or 10,000 people per month. Then you add in the thousands of Canadians who are moving to the city as small towns and suburbs stop being attractive. There's a greatly increased demand for housing here.
But supply is tricky. Toronto is full, land-usage-wise. There's something like two small parcels left (Downsview Park and I forget the other place) where there is honest-to-goodness undeveloped land. Apart from that, all new homes are in the suburb cities around Toronto.
This means all new housing supply in the city is from building up and other densification- which is moving too slowly. The suburb cities are also growing like mad, but the infrastructure to support all that growth isn't there, causing smaller price booms nearby any Go-train station.
But that's just the start. High demand, low supply caused housing prices to rise- leading to speculators buying second homes to flip, which shrinks the supply. It leads to people buying homes they don't want, at prices they can barely afford, because they plan to sell it in 3 years for a profit. The bubble inflates.
So why pop now? Ontario passed laws saying foreign buyers have to pay an additional 15% tax. And foreign buyers were a large chunk of sales. The latest numbers say sales are down something like 50% or more. Prices will start to sink soon.
When the Bank of Canada finally raises interest rates to prevent total catastrophe on the exchange rate, things will really get wild. In Canada, most mortgages have to be renegotiated every few years- how many of them are going to have homes worth well less than their mortgage with rates so high they can't afford to make payments? That leads to a 2008-USA style pop.
It's going to be a bumpy ride...
Edit: also worth noting, this is just Toronto. Vancouver has some similar dynamics. The rest of Canada may not have a housing bubble at all- they'll just have to deal with the economic fallout of this mess.
Canada has something like 240,000 immigrants per year, and half of them come to the Toronto region- or 10,000 people per month. Then you add in the thousands of Canadians who are moving to the city as small towns and suburbs stop being attractive. There's a greatly increased demand for housing here.
But supply is tricky. Toronto is full, land-usage-wise. There's something like two small parcels left (Downsview Park and I forget the other place) where there is honest-to-goodness undeveloped land. Apart from that, all new homes are in the suburb cities around Toronto.
This means all new housing supply in the city is from building up and other densification- which is moving too slowly. The suburb cities are also growing like mad, but the infrastructure to support all that growth isn't there, causing smaller price booms nearby any Go-train station.
But that's just the start. High demand, low supply caused housing prices to rise- leading to speculators buying second homes to flip, which shrinks the supply. It leads to people buying homes they don't want, at prices they can barely afford, because they plan to sell it in 3 years for a profit. The bubble inflates.
So why pop now? Ontario passed laws saying foreign buyers have to pay an additional 15% tax. And foreign buyers were a large chunk of sales. The latest numbers say sales are down something like 50% or more. Prices will start to sink soon.
When the Bank of Canada finally raises interest rates to prevent total catastrophe on the exchange rate, things will really get wild. In Canada, most mortgages have to be renegotiated every few years- how many of them are going to have homes worth well less than their mortgage with rates so high they can't afford to make payments? That leads to a 2008-USA style pop.
It's going to be a bumpy ride...
Edit: also worth noting, this is just Toronto. Vancouver has some similar dynamics. The rest of Canada may not have a housing bubble at all- they'll just have to deal with the economic fallout of this mess.