Buy or Sell? What Factors Support a Toronto Housing Crash in 2017?
November 24, 2016 ♦
Gord Collins ♦
real estate
♦
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Canada’s real estate market expected to cool further in 2017

Some experts are calling for a housing crash in 2017, based on overheated prices, yet they don’t discuss what might be done to alleviate the problem in the Toronto region. The key issue for the Toronto real estate market, (as it is in the US market) is a lack of housing supply but there are other factors outline below. A host of government leaders have sought to crush land development and have quietly gotten away with their policies. But now the spotlight is aimed directly on them.
Could Premier Kathleen Wynne arrange to cancel the Places to Grow legislation and open up new land to ease home prices? Isn’t that a more sensible thing to do rather than providing more incentives for first time buyers who are up to their ears in consumer debt pondering a very high priced condo or house purchase? Is Kathleen Wynne is precipitating risk factor for a big housing crash in Toronto? Will interest rates rise so buyers would be less likely to bid on homes and condos?
Some would suggest that she and the Liberals are too ideologically driven to flex on that one. Yet Wynn’s approval rating is now below 20%. That is really low so easing up when the Federal government is crack down on mortgages doesn’t make a lot of sense. Her super low rating means Ontario doesn’t want her as Premier anymore and out of desperation facing years more in office, she could do something risky to seek approval. Wynne is a sell now factor.
More Foreign Investment Needed
The high demand for homes and property from foreign investors from China and the Middle East and the US, has been a wonderful thing for Ontario and Canada. If not for real estate, the world has no interest in investing in Canada. Foreign investment is at its lowest level in 60 years which means no one is going to save us.
Federal Justice minister Bill Morneau recently announced measures to cool the Toronto market, however experts feel the Feds can’t do much, and believe the provinces should be managing their own affairs. That brings it back to the Wynne government.
Justin Trudeau should be travelling and posing for cameras on the subject of why investing in Canada is wise. New free trade deals with ailing South American countries won’t work because we have nothing to export and they don’t buy our stuff. Without financing, the Ontario companies don’t stand a chance competing against well funded foreign firms. A low dollar and access to the US market is all we have.
If Justin Trudeau ever played the game battleship as a child, I suspect he was out of the game quick! Blown out of the water as they say.
If the 2017 Toronto Housing Market does Crash
If a housing crash is imminent, you’d be wise to unload your property now during the winter. Is 10 or 20 thousand dollars worth missing out on the greatest real estate cashout of all time? Up or down market, a wise person would seriously consider selling.
What are the economic and real estate market factors that affect your selling decision?
 US economy
 GTA economy and employment
 Canadian consumer debt
 NAFTA agreeement
 immigration levels
 add on taxation by Ontario, city and Toronto governments
 soaring home prices
 moderate new home construction
 government meddling
 mortgage rates
 number of millennials buying homes
 Wynn and Trudeau don’t have a handle on the economy
 political pressure to keep home prices up to protect homeowners equity and credit situations

What the Heck Happened in BC?
British Columbia’s market plunged not long after the foreign buyers tax was implemented. That hurt speculators and Asian buyers who were finding a way to invest in Canada. It was good for BC renters, but not good for Vancouver. Foreign investors will have lost some trust in the BC government. These sorts of radical taxes and regulations don’t go over well with investors.
Unfortunately, the pain of high rents and no vacancies was too much for the Vancouverites to bear and they pushed the tax through. The Asian money soon transferred to Los Angeles and Seattle where potential is so high.
Will the bubble burst in Toronto soon? A lot of buyers and sellers and mortgage lenders are struggling with that question.
Kathleen Wynn and John Tory aren’t talking about the crash possibility and the various mayors in Vaughan, Richmond Hill, Aurora Newmarket etc aren’t saying much either. They’re enjoying the tax haul, but they realize Canadian consumer debt is a huge matter. If mortgage rates rise, we’ve got a situation on our hands.
With high home prices come new home construction and if you’ve been to Aurora Newmarket, Bradford and King township lately you’ve seen the huge growth in new communities. But the demand far outstrips supply. The fact is Toronto is a hot market and prices aren’t slowing.
Is this the best year to buy rental income property? Read these posts on best investments in 2017 including investing in real estate.
Does the Past Tell Us Anything?
If the past does tell us anything, it tells us we’ll probably make the same mistakes again about forecasting crashes and bubble downturns. If we look at Toronto home prices over the past 60 years, we’ll see that they’ve just kept rising. Even the great recession cause only a small blip and the US recession of 2007 didn’t even leave a dent. As long as there’s a lack of development land, the price will speed up like an angry commuter on Indy 400 (or 404 or 401) and inevitably crash.

The last thing we’re left with in pondering the possibility of a Toronto housing crash in 2017 is what starts an avalanche?
Here’s a few resources on the bubble issue:
Housing market has ‘low probability’ for collapse: RBC report

ANALYSIS | No need to panic, CMHC says, as it waves red flag on housing values: Don Pittis | CBC News

Over the last few years as Canadian house prices rose and rose, the world’s big banks have warned a bubble was forming. Now that CMHC’s adds its own warning, will anyone listen?

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