Eric Glazenberg

CMHC worried by Toronto's Housing Market

04 November 2015
Eric Glazenberg

CMHC recently stated that the biggest concern for Toronto's real estate market is "overvaluation", and that the current prices are not supported by economic factors and demographic demand. Its no secret that Toronto has become quite popular with international buyers (mostly Asian and Middle Eastern). For them, Canada is a safe place to park their money and watch their investment grow. Yes, housing is getting expensive and its becoming more and more difficult for local buyers who are entering the housing market to come up with down payments. That said, we've had an injection of foreign buyers who are certainly helping prop up this market.

Is real estate becoming unaffordable for the average university grad who has student loans to pay off? It sure is. Are there international buyers with large down payments who are picking up the slack? There sure are. For locals who have been in the real estate market over the past 10 years, most have watched their property values double which has translated into a huge increase in equity. These people will be able to "move on up".  For those of us who haven't been invested in real estate over the last decade, its certainly more difficult to get into the market at this point. Many are getting help from family, and there are those who are collecting inheritances as well, which helps the cause.

Is the market overvalued? Well, real estate, like any other market, is a function of supply and demand. What we're currently seeing in the city is low supply levels and lots of demand (at least for freehold properties).  If and when interest rates increase, there might be a problem, as home owners can't afford the increased interest payments. Also, if this foreign buying dies down, it can cause  the market to stall.  For now, this market is chugging along. 

One segment where I do see issues is the new condo market. Many people who have invested in new condos over the past 4 years are not seeing any positive growth, and some are seeing a decrease in the value of their condo from when they bought it off the plan.  Again, it all comes down to supply and demand, and when the developers are putting up glass tower after glass tower with no end in site, the result is overbuilding and a stabilization or even drop in prices. Those are my 2 cents on the matter... For the original article, click on or paste the following link: