Aug 31, 2011
The resilient bubble…
In an article that appeared in The Wall Street Journal last week, Toronto was catapulted into the same stratosphere as London, Sydney, Vancouver and Miami while the enthusiasm of would-be investors was simultaneously reigned in with the caution that the Toronto condo market might soon experience a ‘correction’.
Torontonians have been bracing for the Toronto housing market bubble to “burst” for some time now (and, no one can claim we have not been forewarned). Sure enough, soon after the Wall Street Journal article, as if on cue, the TD Bank estimated zero growth for the Canadian economy for the second quarter ended June 30 and warned Canadians of the risks of a recession. Today, following Finance Minister Jim Flaherty’s announcement of the weak second quarter numbers, TD Economist Diana Petramala served a reminder that “Canada is not an island, and is vulnerable to external economic shocks”
Meanwhile, the latest news release from the Toronto Real Estate Board reported that Toronto home sales increased 24% during the first two weeks of August compared to sales during the same period in August 2010. The average selling price for a home is now $440,150, which reflects an annual increase of seven percent.
What to make of these seemingly opposing facts? Perhaps, rather than preparing for the bubble to burst, we might expect to see a gradual and modest ‘deflation’, bringing the housing market within healthy limits. With interest rates set to remain steady at least until 2012, the upshot may be that first-time home buyers may actually have a stab at affordable housing in Toronto while weary investors can still assure themselves that in the long-term their investments are in a City that is only beginning to reach its full potential.
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