The following is a true confession from the trenches. It came to me Tuesday afternoon, about the same time three levels of government were meeting to discuss what the hell to do about GTA real estate. The property in question is a suburban townhouse an hour’s drive (in traffic) from the beating heart of the 416.
Last Thursday my agent put up here sign saying Coming Soon and the plan was to put it on MLS on Wednesday April 19th and have open houses over the weekend of 22nd/23rd. The next afternoon a neighbour came over and spoke to my daughter and said she was interested in the house for her sister. The neighbour and her husband came to see the house on Saturday, did a cursory walk through and asked to come back later in the day. Keep in mind I hadn’t had the cleaners in yet so the house was only presentable. They came back and spent all their time upstairs and then signed the papers! They hadn’t looked in the garage or set foot in the backyard and they bought without an agent of their own.
My agent told them we were going to list at $1,088,000 but were looking for $1.2, they offered $1.25 with a June close, no conditions, and a lease back for 3 months at $1,400/month plus my agent’s commission dropped to 3% because they didn’t have an agent.
I took the offer! I still can’t believe someone could spend that kind of money after barely looking at the place.
Yes, lots of deals are falling apart (Derek, from yesterday’s post, will attest to that), but the fact remains most people think urban real estate in southern Ontario or the Lower Mainland is riskless. All you need do is look at total household debt ($2 trillion) of which 65% is mortgages, to know Canadian society has made a huge gamble impossible to win – that real estate will not correct. Ever. And if it does, recovery will be swift.
But no asset class has entered a bubble and stayed there. Anywhere. Anytime. This frosty, confused nation will prove to be no exception. And the guy who sent me the note above – now a millionaire with subsidized rent – gets it. His $1,200,000 invested in a stable, sensible portfolio should turn out six grand a month. More than enough to rent a far better place to live, or maybe turn into $2 million in a decade. How can anyone not seriously consider feasting on the FOMO-addled greed and stupidity of the house-horny masses?
The latest developments support sellers, and spank buyers. CREA has announced a stunning 6.2% monthly increase in Toronto house prices. Yes, in a month – an annualized advance of 74% in March. In the latest quarter the price gain was the biggest since records were first scratched into the bark of birch trees on the banks of the Humber by ragged river people back in 1988. Said BMO chief economist Doug Porter: “This housing market needs a bucket of water thrown on it and soon.”
And it may be coming.
That statement Bill Morneau released after today’s House Horny Summit said this: (a) every 90 days three levels of government will meet to analyze the situation and “take collaborative action to address data gaps and support the proper functioning of the market”. (b) There will be no breaks for buyers “which would impact housing prices by boosting demand.” Sorry, kids. (c) The CRA will ship storm troopers into the GTA “to ensure compliance of the real estate sector with tax laws and will work with the Province of Ontario to obtain enhanced land registry data to help support tax compliance activities in the GTA.”
Yup. Not much there. Blah, blah, blah. But not much was expected from the feds to address a Toronto problem. Instead the major actions are anticipated in the provincial budget, including universal rent controls to kill off condo excess, and a speculation tax on non-residents. The mayor, for his part, continues to prattle on about a Vancouver-style Empty Houses Tax, one of the goofier notions of our time.
Well, I’m getting tired of writing this drivel about the Toronto housing market every day. I can only imagine your pain in reading it.
Tomorrow we’ll change the change. Nuclear war, maybe. That would be a relief.