Condominium and Real Estate Media Bashing Continues Unabated

The incessant of Toronto media bashing of the GTA condominium market reminds me of one of the unique Canadian traits.  Canadians simply cannot accept success, in their entertainment stars, sports stars and their industries. 

The residential construction industry in Canada, and particularly in the GTA, is one of the key drivers of the Canadian economy.  It creates more jobs than virtually any other industry in Canada and receives virtually no government support.  In 2008 and 2009 when the Canadian and world economies were literally falling apart, governments provided handouts to the auto industry and other industries that were in dire straits.  The construction industry suffered dramatically as well but no one came knocking on the doors of developers to assist them.  Developers dug down deep and weathered the storm totally on their own.

A rebound of the Canadian real estate market and in particular, in centres like the GTA and Vancouver in 2009 to 2012 was quite remarkable, in the face of worldwide recession and economic catastrophe everywhere except here.

Yes, the condominium market has exploded in the GTA in a large part because of the “places to grow” legislation that the province has imposed over the last 8 years limiting greenfield growth and pushing growth in urban centres.  Low-rise sales have plummeted and high-rise sales have likewise skyrocketed, being the only affordable housing available to first time buyers, immigrants and investors.

And yes, 2011 saw records sales of almost 28,000 units.  But rather than extolling the virtues of the residential construction industry, its health and the vibrancy it has created in the downtown core of Toronto and Vancouver, the media persists in looking for the cloud behind the silver lining.  When things were going well over the last few years, the media constantly claimed it was a housing bubble that was going to burst and leave homeowners and investors ruined.  Now that the market has softened, as is the norm in any cycle, the so called experts and pundits are relentless in predicting further calamities in the urban housing markets, counting the number of high-rise cranes, unsold units and dramatic difference in sales in 2012 from 2011. 

The Canadian Business Magazine, Toronto Life, McLean’s and of course the Toronto Star, are never ending in their predictions of doom and gloom.  As everyone knows, perceptions become realities.  Investors, both domestic and foreign, read these papers and actually believe them.  Politicians count the number of cranes and read the papers and believe them.  The federal government has ratcheted up the CMHC insurance rules 3 or 4 times over the last few years in order to quash the potential “housing bubble”.  Rather than supporting our residential industry, provincial and federal governments continue to view the industry as a potential economic disaster on the one hand and yet municipal governments view developments as cash cows and continually raise taxes, development charges and a myriad of other fees that can add up to $100,000.00 of costs on a house.  Talk about schizophrenic government policies.

Most recently, Ben Rabidoux in his article in the Globe & Mail http://tiny.cc/6jujsw  featured 5 reasons why not to buy a Toronto condominium.  What a terrific article to encourage investment in home ownership in Toronto.  Yes, it is slowing down.  Yes, prices are not increasing as dramatically as they were before.  Yes, there is more inventory available.  Yes, the population growth is slowing.  Lets look behind these supposed doom and gloom reasons.  The market sales in 2009-2011 were not sustainable.  The new condominium market sales of 2012 of 18,000 units was in line with normal condominium sales averages over the last 10 years.  The slowdown was inevitable, particularly when government clampdown on lending rules that made it much more difficult for first time buyers to finance the purchase of units.

It is no wonder that our most successful business people, entertainment stars and sports personalities have to flee this country to receive recognition elsewhere.  We just cannot handle success.  Canadians love to eat their young.  We are specialists in Schadenfreude.

Prices are not increasing so rapidly is a good thing and not a bad thing.  Affordability is a factor and market forces levelling off supply and demand are making it actually more attractive for potential condominium purchasers to invest in the Toronto market.  It is the best time to buy, not the worse time to buy.

Yes, the population growth in Toronto is not increasing at the same dramatic rate it was 10 years ago.  So we are not getting 120,000 immigrants a year,  Instead, we are getting 80,000-90,000 immigrants a year.  That is still a tremendous influx of people into the city requiring housing.  Because of the provincial growth policies have made low-rise housing unaffordable, this leaves only high-rise housing available as an alternative.  The rental market is still extremely tight with all available condominium housing filling the gap supply.  There is no other rental housing being constructed in Toronto, given the rental legislation.

1. Prices have leveled off and builders are offering more incentives to sell units;
2. The greater inventory of units will make developers much more competitive with each other, offering incentives and possibly reducing prices somewhat to attract homebuyers.  Is that a reason not to buy?;
3. Government charges on new housing are only going up and construction costs are only going up.  Waiting another year or two for prices to come down is unrealistic for homebuyers.  With the slowing of sales and price increases to a more balanced market, it is the best time to buy;
4. With a large number of projects being completed this year, there will be opportunities for those condominium buyers who would like to buy finished units to buy new re-sales for those investors looking to move their product.  There will be no huge outpouring of re-sales by investors as a result of condominium registrations.  In the past, there have been 10-15% re-sales and these will continue making supply available to new homebuyers; and
5. Although there are signs of economic slowdown in Canada and the housing market, the economists and industry experts are clear that there are no real drivers that would cause the housing market to crash.  A “soft landing” has been predicted by many. 

I haven’t read any recent articles that the auto industry is in a bubble scenario.  There are record sales of auto sales this year but I don’t read any reports in the newspaper about an impending bubble waiting to blow up in the auto market.  Why is that?  There needs to be some serious retraining of our journalists to support our successful industries in Canada as opposed to constantly putting them down in good times and not so good times.

With no change in interest rates in sight, and continuing restraints on land supply, in the mid and long-term, housing is one of the best investments anyone can make in this country.