More People Are Buying Toronto Real Estate That Shouldn’t, And Half Are At Risk of Defaulting

Toronto real estate buyers scrambling to get in the market are increasingly taking out high-ratio mortgages, with far too little income.

The number of people that shouldn’t be purchasing Toronto real estate, but are buying anyway, is skyrocketing. At least that’s the consensus from the latest high-ratio mortgage data we scored from the Bank of Canada (BoC). According to these statistics, more people are entering into high-ratio mortgages, and they’re doing it with a high loan to income ratio as well. The combination makes these buyers perfect candidates for defaulting on their mortgages.

High Ratio Mortgages

High ratio mortgages are ones with minimal equity in the home (i.e. the down payment the buyer had was really small). The industry defines a high ratio mortgage as any mortgage with a loan-to-value ratio of more than 80%, which basically means anyone with less than 20% down. These types of loans have little risk for the lender, since the borrower also has to pay the cost of securitization (a.k.a. they have to buy default insurance). Keep in mind, the default insurance the borrower is required to purchase actually covers the bank in the event of a default, not the borrower. The borrower still assumes all risk.
Experts say you should have a loan-to-income ratio of less than 300%. In plain english, this means your mortgage should be 3x your gross income max (less if you have significant debt). If you make $100,000/year, and want a $400,000 condo – you should have $100,000 as a downpayment (25%). Any less, and your chances of carrying that loan become increasingly more difficult. If you’re high leverage, and have a mortgage over 300% of your annual income, you’re at a large risk of default. If that ratio exceeds 450% and you’re also a high-ratio borrower on top of it, the odds are stacked against you.

Toronto Seeing More High Leverage Loans With A High Loan-to-Income Ratio

Recently, Toronto has seen a massive increase in people who have high leverage loans, and also have high loan-to-income ratios. According to the BoC, “almost half of the high-ratio mortgages originated in Toronto in the third quarter of 2016 had LTI ratios exceeding 450%.” That’s right, 49% of high ratio mortgages also had a dangerous loan-to-income ratio. The same quarter in 2015 saw 41%, and that quarter in 2014 was just 32%. So the loan quality has been rapidly deteriorating over the past couple of years.

Spreading Beyond Toronto

The problem isn’t just isolated in Toronto, it’s spread to surrounding cities. Oshawa and Hamilton both saw high-ratio mortgages with high loan-to-income ratios more than double in the past 3 years. BoC analysts saw the ratio increase from 10% to roughly 25% over that time. Now I know Oshawa is the Manhattan of Eastern Ontario, but I’m not sure a high-leverage mortgage that’s out of your budget is a smart idea.
The quality of loans deteriorating rapidly over the past two years should be a sign of how healthy this market is… or isn’t. Toronto real estate prices have had a thirty year run, without much resistance. Suddenly over the past two years, people that shouldn’t be buying houses are scrambling to get into the market. These buyers are taking out loans they’re likely to default on. Since they’re insured, banks have little to no risk, but as I mentioned above, the risk still falls on the buyer. Unfortunately, this doesn’t just impact the people who are taking out these risky mortgages, it’s contributing to rising prices for responsible homeowners as well.


Please share this

Toronto Community Housing Corporation TCHC: Government plans closure of hundreds of social housing units

Toronto Community Housing, the largest social housing provider in Canada, is planning to close 400 homes next year because of a lack of repair money.

Those closures, on top of 600 units to be boarded this year, would bring the total number of shuttered homes to 1,000 by the end of 2018.

There are now more than 181,000 people on the wait list for subsidized housing.

The fact that hundreds more people will lose their homes was outlined to board members at a meeting Tuesday, just days ahead of a provincial budget announcement that has left city officials seriously concerned the city will be short-changed on social housing.

“We should be discussing how to open new affordable housing units, not debating how many we’re going to have to close,” said Councillor Joe Cressy, who is a member of the board.

“In a city as wealthy as ours, in a province as wealthy as ours, it is an absolute failure on the part of all levels of government if we close units.

“Full stop.”

Toronto Community Housing, which manages nearly 60,000 units across 2,100 buildings, needs to secure an additional $350 million for repairs next year in order to prevent further closure of homes that will no longer be safe to live in.

The repairs are substantial; in 2016, they included fixing roofs, structural deficiencies, elevators and mechanical issues like plumbing.

Closing units means TCH is responsible to re-house those that are displaced, putting additional pressure on the waiting list that has continued to grow since 2007.

The original 10-year repair plan approved by the city budgeted a total $2.6 billion. Of that, $1.73 billion in funding is still needed. The plan called for spending $438 million next year.

But Toronto Community Housing’s vice-president of facilities management, Sheila Penny, explained only $82 million is available.

Of that, $38 million will come from further mortgage refinancing — which has up until this point largely financed the more than $900 million in repairs spending.

Eyes are now on the province, which is set to unveil a budget on Thursday.

Although Premier Kathleen Wynne recently indicated all three levels of government should be working together on housing in 2017, reinvesting in social housing would mean a reversal of decades of provincial downloading of the responsibility for the homes.

Unveiling her government’s Fair Housing Plan last week, the premier made no mention of social housing.

That announcement was met by a statement from the city’s housing advocate Councillor Ana Bailao.

“Toronto strongly encourages the province to step-up, and provide much needed funding, to help prevent the closure of social housing units in Toronto,” it read, in part.

On Tuesday, Bailao’s message was direct on the closure of social housing units: “If we don’t continue the (repairs) program, then it’s going to get even worse,” she told the Star.

“We have to know if we can count on them to address this huge housing issue.”

Mayor John Tory said he too has received no assurances about provincial funding.

“It’s time for all hands on deck to keep this city great and to make it a place that’s fair to live for all people,” he told reporters on Tuesday.

Housing Minister Chris Ballard’s office offered no details when asked about the issue by the Star this week.

“Canada’s new government agrees with Ontario that there is a need to invest in housing and infrastructure. We are ready to strengthen our partnership with the federal government to ensure that our most vulnerable people are not left behind,” said a statement from spokesperson Theresa Lubowitz.

The $82 million in repair money budgeted for next year does include $23 million from the federal government’s first phase of social infrastructure dollars announced last year.

As part of its 2017 budget announcement, the federal government dedicated $11.2 billion to housing over 11 years, falling short of the $12.6 billion over eight years request from mayors of major municipalities, including John Tory.

But the federal government has yet to elaborate on how much will be available for social housing repairs and how much of it will be available for next year.

“We’re just not sure yet how the federal money will flow and how it will be allocated. We’re hopeful we get more information on this soon,” Toronto Community Housing spokesperson Brayden Akers said in an email

The federal government was unable to provide clarity on the matter this week.

“Canada Mortgage and Housing Corporation is currently working on detailed program designs, and, as a result, the mechanisms through which funding from budget 2017 will flow will be announced later,” wrote Mathieu Filion, spokesperson for Social Development Minister Jean-Yves Duclos, who is responsible for housing.

Former interim CEO Greg Spearn, whose sudden resignation was announced Tuesday, has been sounding the alarm on the repair backlog for the past two years, noting they would hit a wall in 2017 without dedicated funding.

He told the Star earlier this year that TCH would be on track to close a unit a day in 2018 if more funds were not secured.

If TCH does not keep up with repairs, it is estimated more than 7,500 homes will need to be boarded up — more than 10 per cent of the entire portfolio.

Please share this

Toronto Real Estate: Bubble Indexes, House Price Illusion, and Mortgage Warnings, Ross Kay - April 24, 2017

Please share this

Toronto Real Estate: Rent control measures could lead some Ontario condo investors to sell: report

New rent control measures unveiled last week by the Ontario government could push some small investors out of the condominium market, according to a new report.

Urbanation, a research and consulting firm specializing in the Toronto condominium market, said the imposition of rent control by the government on recently built units is the "single biggest and potentially most harmful change" introduced in the government's plan.

Last week, as part of its plan to tackle hot housing prices, the government revealed that rent control will now be extended to all units, including those built after 1991, which had previously been exempt.

Ontario's Fair Housing Plan also means annual rent increases for existing tenants can be no higher than the rate of inflation. Under the plan, rent increases will be capped at 2.5 per cent, even if the rate of inflation is higher.

In its report, Urbanation said the average pre-sale investor with a 20 per cent down payment on a condo unit finished this year will have carrying costs equal to the going rate on the rental market. "So even with historically low interest rates, a rental investment with the maximum allowable borrowing limit generates zero net income."

Urbanation also said that while condo investors who bought several years ago have a stronger cash flow due to their lower purchase prices and mortgage carrying costs, those who purchased more recently are at greater risk of rising costs, and may prematurely decide to sell.

"This would lead to an outright reduction in the supply of rentals in the GTA and would eventually negatively impact new condo sales volumes, which would have wider reaching consequences for the overall housing market," Urbanation said.

Citing Canada Mortgage and Housing Corp. estimates from 2016, Urbanation said that about half of recently finished condos were used as rentals.

Urbanation said that without small investors, condo development would be drastically reduced and the rental supply would be dramatically lower than it is today, leading to even higher prices and rents.

The group said that given how fast prices have risen recently, even incremental increases in interest rates will mean higher holding costs that far exceed the rent controlled limit.

"The bigger issue is that rent control will eventually cause condo investors to begin to shy away from making new purchases, effectively slowing new development … and choking off the market's key source of new rental supply," Urbanation said in its report.

Thus far, the province's plan has been met with mixed reaction. On the day it was unveiled, a group representing low-income families applauded it, while the Federation of Rental-housing Providers of Ontario panned it.
Please share this

Toronto, TTC subway air pollution on par with Beijing smog, study finds

Please share this

Ontario’s rent and housing reform: 16 big changes, explained in charts

What Ontario is doing:

• Expanding rent control to all private rental units
• Introduce legislation to strengthen the Residential Tenancies Act
• Making sure multiresidential apartment buildings are charged property taxes at similar rates to other residential properties
• A $125-million program over five years “to further encourage the construction of new rental apartment buildings”

Background: Ontario’s current two-tiered system for rent control is a loophole left over from the Mike Harris era. In the 1990s, the Progressive Conservative government removed rent control on new rental properties but left them intact for properties built before 1991. The result has been a development boom for condos, which are exempt from rent control, and whose residents can see rent hikes of 30 per cent or more. But even for buildings under rent control, landlords have methods for forcing tenants out or making renovations that allow them to charge higher rent; a recent Globe analysis of data from Ontario’s Landlord and Tenant Board found that eviction applications have jumped 23 per cent since 2013. 

Foreign buyers and speculation

---

What Ontario is doing:

• Introducing a 15-per-cent “Non-Resident Speculation Tax” in the Greater Golden Horseshoe region
• Partnering with the Canada Revenue Agency to strengthen reporting requirements and make sure taxes are paid on real-estate purchases and sales

The backstory: To crack down on real-estate speculation, Ontario is taking a page from British Columbia’s playbook. Last August, B.C. introduced a 15-per-cent tax on residential properties bought by owners who aren’t Canadian citizens or permanent residents, which sent property sales plunging almost immediately. But another side effect has been a dip in property transfer tax revenue, one of the province’s key sources of income. 

‘Property scalpers’ beware

---

What Ontario is doing:

• Working to “understand and tackle” real-estate practices that allow “paper flipping,” which includes using assignment clauses for real-estate speculation
• Reviewing rules for real-estate agents to “ensure that consumers are fairly represented”

The backstory: Mr. Sousa has spent the past few weeks promising a crackdown on “property scalping” in Ontario, which he described as “those who go into new developments, buy up a slew of properties, and then flip them, while avoiding paying their fair share of taxes.” That phrase didn’t make it into Thursday’s announcement, which instead referred to “paper flipping.” In B.C., the use of assignment clauses for real-estate speculation came to be known as “shadow flipping” after a Globe investigation of the practice, which led to legislative changes in B.C. cracking down on it. Here’s an explanation of how it works. 

Vacancy tax

---

What Ontario is doing:

• Introducing legislation to let Toronto “and potentially other municipalities” introduce vacancy taxes

The backstory: Last year, Vancouver – where 6.5 per cent of the housing stock is vacant, according to a recent study, the city’s highest proportion in 35 years – became Canada’s first city to impose a vacant housing tax. (The city is still implementing the 1-per-cent tax, with the first payments due in 2018.) Toronto Mayor John Tory has actively sought to follow Vancouver’s lead.

---

Other changes

---

What Ontario is doing:

• Create new market housing and affordable-housing units with surplus provincial land
• Creating a “Housing Supply Team” to identify obstacles to housing developments and work with developers and municipalities to address them
• Establishing a group to advise the government on the housing market and the effects of the newly announced changes
• Educating consumers on their rights in real-estate transactions
• Giving municipalities “flexibility” to use property taxes to fuel development
• Overhauling standards for elevator repair
• An updated Growth Plan with municipalities to address density and “an appropriate range of unit sizes”

Overview: What the market looks like

 

Please share this

Ontario Finally Cracks Down On Toronto Housing Bubble: Launches 15% Foreign Buyer Tax

Almost a year after Vancouver, ground zero of Canada's housing bubble inflated with Chinese "hot money", implemented a foreign buyer tax, and just weeks after Toronto's housing bubble officially went nuts as prices soared 33% Y/Y, prompting economists such as David Rosenberg to demand a government intervention, Ontario's Liberal government has finally cracked down on foreign buyers and according to CBC will join Vancouver in slapping a 15% tax on home purchases by non-resident foreigners, while expanding the province's existing rent control system to cover all tenants.

The moves come after the price of the average home in the Greater Toronto Area jumped 33 per cent in a year, triggering warnings of a real estate bubble, as well as after reporting by CBC Toronto revealed landlords slapping massive rent increases on tenants.   

The announcement, which is expected to be made Thursday morning, will include in addition to the foreign buyers tax and expanded rent control, the following measures:

•     A rebate of development cost charges to encourage building of more rental housing.
•     A standardized lease document for all tenants.
•     A ban on flipping of pre-construction units by speculators.
•     A review of the rules governing the conduct of real estate agents.

The full details will be unveiled at 9 a.m. today by Premier Kathleen Wynne, in Toronto's neighbourhood of Liberty Village, along with Finance Minister Charles Sousa and Housing Minister Chris Ballard.

The highlight, however will be the 15% foreign buyer tax, which after being implemented in Vancouver halted the local housing bubble dead in its tracks and led to a sharp pullback in both home price appreciation and a torrid pace of transactions. Some more details:

Sources with knowledge of the announcement tell CBC News that Ontario will impose a 15 per cent tax on residential real estate purchases by anyone who is not a citizen or permanent resident, if they are not living in the province. Called the "Non-Resident Speculation Tax," it is similar to the tax imposed in Metro Vancouver last year, but with a rebate for homebuyers who become resident within a limited time period after the purchase. 

The tax will apply to purchases in the Greater Golden Horseshoe, an expanse of land that includes the Greater Toronto and Hamilton Area, as well as the surrounding region stretching from Peterborough through Barrie, Waterloo and the Niagara Peninsula to the U.S. border.

In addition to the tax aimed squarely at Chinese buyers, the Ontario government will bring all tenants under the province's existing rent control system, ending the exemption that currently allows unlimited rent increases in units built after 1991. The change will mean annual rent increases for all tenants who stay in their rental housing will be limited to Ontario's inflation-based guideline (which this year is set at 1.5 per cent), unless the landlord gets approval from the Landlord and Tenant Board.
The province will also introduce reforms making it harder for landlords to get approval for a higher-than-inflation rent hike. For instance, landlords who have yet to repair elevators after being ordered to do so will be unable to apply for such an increase. Ontario will also bring in a standardized lease, such as exists in Quebec, to stop landlords from putting illegal clauses in their contracts with tenants.
  
To make up for the expansion of rent control, CBC adds that the government will announce new incentives to developers for building dedicated rental accommodation targeted at the middle- and lower-income market. The key incentive will be an up-front provincial rebate of development cost charges. In addition, the government will free up more provincial land for building affordable housing, both for sale and for rental.

Additionally, the government will ban speculators from "assignment flipping" in the pre-construction housing market. The move is targeted at investors who put deposits on multiple units at pre-construction prices — typically in condominiums, but sometimes in new subdivisions — then sell the title for profit before the building is complete, a process known as assignment. Sousa has previously signaled his intent to target such investors, labelling them "property scalpers" who are driving up prices. 

Finally, anyone who buys real estate in Ontario will have to reveal their citizenship and place of residence. The measure was promised by Sousa last November, but takes effect on Monday, along with a range of other disclosure requirements. Buyers will also be required to state whether the property is to be used as a primary residence or investment, whether the buyer is acting as a representative for the eventual owner, and to reveal the names behind any numbered company purchasing real estate.


Please share this

Toronto Police Union Wants Pride Funding Pulled After Floats Banned

The union representing Toronto’s police officers is urging the city to pull an annual grant to Canada’s largest Pride parade after the event banned police floats.

In an open letter released by the union Wednesday, a committee representing LGBTQ officers in the force said it would be unacceptable for the city to give the roughly $260,000 grant to an event that excludes certain municipal employees.

The committee said officers would feel completely devalued and unsupported by the city if the funding continued.

The plea comes weeks after a similar call from a Toronto city councillor, who said the grant should be voted down until the city’s Pride parade returns to its “core principals of equity and inclusivity.”

In January, Pride Toronto adopted a list of demands issued by the Toronto chapter of Black Lives Matter, including banning police floats from the parade.

Members of the anti-racism group held a sit-in part way through the parade last July, stopping it from moving forward for about a half hour, until Pride organizers signed the list of demands.

Black Lives Matter said it opposed police presence in the parade because it could discourage marginalized communities from participating.

About a month after Pride Toronto’s ruling, Toronto’s police chief announced the force would not be participating in the annual event this year, citing divisions within the LGBTQ community as a key motivator.

The city still provides policing, transportation and other services for the Pride parade, which would not be affected even if the grant is revoked.

Mike McCormack, president of the Toronto Police Association, read the open letter Wednesday at city hall, where he was set to deliver it to Mayor John Tory.

“When any city employee, regardless of their job function, is disinvited from an event hosted in the city of Toronto, we feel it is simply a conflict of interest and unacceptable that the City of Toronto remain a sponsor,” he read.

“We can think of no example in Canada where either a public or private employer has been a lead sponsor for an event their employees were asked not to participate in.”

Pride Toronto said although the city’s police service will not be participating this year, individual LGBTQ officers were welcome to march in the parade.

“Toronto city council has provided valuable support to Pride through funding and support services. In turn, we provide the largest economic impact of any festival in the city,” the organization said in statement Wednesday night. “We hope this reality will be front of mind for council as they consider our funding this year.”

The issue of police participation in Pride parades has also emerged in other Canadian cities in recent months.

The Vancouver Pride Society has asked officers in that city to show up in fewer numbers and without their uniforms at the request of the local chapter of Black Lives Matter.

Halifax police have also announced they would pull out of the city’s Pride parade this year in light of the “national debate” about law enforcement participation in such events.

Please share this

Toronto Homeowners Cash Out of Hot Real Estate Market

TORONTO — Sarah Blakely recalls feeling some trepidation when she and her husband shelled out more than $300,000 for a modest 1 1/2-storey house in a less-desirable part of Toronto.

Seven years later, they found themselves on the right side of a hot housing market, with values tripling in a 'hood suddenly considered up-and-coming for young families seeking detached homes.

They recently sold that renovated three-bedroom for more than $1 million and now expect to live mortgage-free in a four-bedroom purchase in their hometown of Ottawa.

The 34-year-old says it made sense to cash out of a city that was draining their finances, energy and family time.

"My husband and I saw an opportunity to take advantage of the recent gains in real estate and to move to a less expensive city to live mortgage-free, support our savings for retirement and also to be closer to family," says Blakely, whose new home has nearly twice the square footage.

And they may have taken action at just the right time.

Blakely's real estate agent Josie Stern says the market appears to be cooling, and doubts Blakely could fetch that same jackpot sale today.

"A little bit of air has been let out of the bubble," she says.

Many buyers and sellers are waiting to see what will come of Tuesday's scheduled meeting between Finance Minister Bill Morneau, Ontario Finance Minister Charles Sousa and Toronto Mayor John Tory, who are expected to discuss ways to rein in Toronto's hot housing market.

Meanwhile, the Ontario government is promising to announce affordability measures soon.

Stern says some buyers are delaying their purchase in anticipation of possible fixes.

"Buyers have been in such a stressful situation for so long that now they think somebody is going to save them and they're waiting," says Stern. "They've dug their heels in, they're tired of competition and then there's those that are still proceeding, but there's been quite a big pullback from buyers."

Sellers who've bought new homes are rushing to list their old property, she adds, but many are not getting the high bids seen a month ago.

The Toronto market has been astonishing, with the average sale in the Greater Toronto Area skyrocketing last month to $916,567. That's up 33.2 per cent from a year ago.

With strong demand and limited supply, it wasn't uncommon for bidding wars to result in sales hundreds of thousands of dollars above asking. And a lot of those sellers took those dollars out of the Greater Toronto Area where they can get more acreage, less congestion and still pocket a fair bit of cash.

"We're finding that a lot of people are leaving the city," says Stern, who estimates that about a third of her 35 sales this year involved sellers either downsizing to condos or moving to more affordable markets.

"It's empty-nesters, it's (couples with) babies, it's all kinds of people that are doing this."

Even with a new uncertainty in the air, it's still a seller's market, she adds.

One of her biggest sales was a $2-million listing that went $575,000 over asking in February. The sellers moved to the commuter city of Burlington, Ont.

They're joining buyers priced out of the Toronto market who have gone looking for cheaper housing in smaller communities across the Golden Horseshoe, spurring other sales spikes in the region — Hamilton-Burlington homes jumped 22.6 per cent during the first two months of 2017 compared to a year earlier.

Still other buyers are looking farther afield.

Remember that relatively inexpensive Nova Scotia mansion that dominated Facebook last month?

Real estate agent Wanda Graves of Eastern Valley Real Estate says it's sparked more inquiries from Ontario, Manitoba, Alberta and B.C. house hunters suddenly hip to Eastern Canada's charms.

Nova Scotia sellers are taking notice, and are marketing to out-of-province buyers now considered increasingly likely to make an offer.

"They know that there are buyers out there and now it's, 'How do we reach them?'" says Graves.

Before selling for $455,000, the mansion in Newport Landing, N.S., drew more than one million views on her company's website and 36,000 shares on Facebook.

It's a story Vancouver real estate agent Melissa Wu knows well.

Please share this

Toronto's Housing Bubble Also Causing Trouble For Employers

At the end of a recent hiring process, recruiting firm IQ Partners believed it had found the perfect candidate for a vice-presidency with the Canadian Professional Sales Association. He ticked all the boxes – a senior executive in the field with the right résumé and the requisite expertise. He wanted the job, too. But he turned it down for one reason: Toronto’s housing prices.

After looking at listings, the candidate realized he couldn’t afford a “comparable home” in a move from Mississauga to a neighbourhood closer to the CPSA’s downtown office.

“Despite it being a very attractive job and being interested, he decided to decline simply because of the complications around home prices,” said IQ Partners’ managing partner, Bruce Powell. “These situations happen all the time.”

Increasingly, recruiters and employers are grappling with apprehensive job seekers who simply aren’t sure Toronto warrants its soaring real-estate prices. Typical wage gains have fallen far behind housing prices, which jumped more than 30 per cent in the past year. The issue appears to be most acute with executive positions, which attract talent with higher housing expectations.

“This is a state of emergency right now,” said Toronto Region Board of Trade president and chief executive Janet De Silva about the need to reduce housing costs to avoid seriously damaging the local job market. “The challenge is that at a certain point, it’s both the housing market and the lack of regional transit, and it’s a double whammy.”

Twice in the past month – at a dinner with international CEOs and during a visit from a Saudi Arabian delegation – Toronto’s international business community identified the looming housing crisis as a “top of mind concern,” Ms. De Silva said.

“It’s just the overall cost of doing business in Toronto and their ability to recruit in the talent that they want,” she said.

As a result, recruiters are seeing candidates take jobs closer to their bedroom communities, forcing businesses to either move out of the city or toward its core.

“The companies that aren’t geographically positioned around transportation hubs aren’t as attractive,” Mr. Powell said.

He believes that if IQ Partners wasn’t located across from Union Station, many of his own employees, who commute by GO train from places such as Ajax, Barrie, Milton and Oakville, wouldn’t be able to work for him.

Women, in particular, are choosing to abandon job searches, unable to juggle the cost of housing with families and long commutes, according to Ms. De Silva.

As a result, the Board of Trade has begun research into the impact the tough real estate market has already had on Toronto’s ability to attract talent.

Ms. De Silva points out that almost 80,000 new residents are moving into Toronto annually. The Board of Trade estimates the city needs 30,000 new rental units to match that flow. With just 1,500 new units each year, Toronto is nowhere near matching that target.

“We need to fast-track more rental properties,” Ms. De Silva said. “[We’re in] panic mode, where folks feel like if they don’t get in now, they’re never going to be able to afford it.”

Not all firms or sectors have felt the same impact, however.

Sean Kogan, a managing partner with staffing firm Recruiting in Motion, deals with job classes that fall below the traditional $150,000 cutoff for executive status. RIM matches candidates primarily in the $60,000 to $80,000 salary range. Mr. Kogan says that job market remains buoyant and the flow of candidates hasn’t yet slowed.

But he has his concerns.

“I think it might [slow]. I can’t imagine that if [housing prices] keep going up we won’t see an impact,” he said. “The price of jobs has not gone up nearly to the extent that the real-estate market has gone up.”

Mr. Powell says it’s easier now to hire for entry-level jobs than for senior positions because there’s a higher proportion of young workers, in the early years of their careers, living in condominiums closer to the downtown.

“It’s this interesting dilemma where we can help a company like CPSA hire their sales reps more easily than we can help them hire their VP of sales,” he said.

Gassia Maljian, the executive search director for digital recruiter Creative Niche, hasn’t seen tech companies match the rising cost of housing with increased compensation, either.

“Tech companies based in Toronto offer wonderful perks like subsidized lunches and gym memberships, but when you get down to it, salaries aren’t changing and they aren’t reflective of the housing market,” she said. “Those perks are great, but they don’t pay the rent.”

In the creative world, companies are increasingly moving to Hamilton to attract younger, cheaper talent. Animation studio Awesometown Entertainment is one of several creative companies to move to Toronto’s neighbour to the west, according to Glen Norton, the director of the city’s economic development office.

“You can get lost in the creative world in Toronto because it’s

just so big, and here you can make a name for yourself and plug into a network,” Mr. Norton said.

“It makes it really easy for us to hire juniors who, when they’re coming out of school, it’s much more affordable to reside somewhere closer to Hamilton,” Awesometown president Lucas Lynette-Krech said.

Hamilton’s real-estate prices are soaring too, though. And Mr. Norton fears young people may begin to bypass the city to move even farther out, to communities such as Brantford.
Please share this

Toronto to be Canada's Most Expensive Rental Market

A new report suggests that Toronto rental rates continue to increase as the Ontario government mulls over new rental control measures that could be tabled as early as the upcoming April 27 budget.

According to apartment listings website Padmapper, the median rent for a one bedroom in Toronto surpassed the $1,750 mark for the first time, on the heels of a 4.9 percent jump in the median price for such units this month.

Last month, the site also tracked a 4.9 percent increase. Since Padmapper began recording the median rental rates in Toronto for one and two bedroom apartments, they've risen from $1,320 and $1,650 (June 2016) to $1,760 and $2,270 in the span of 10 months.

If the trend continues, this puts Toronto on track to pass Vancouver as the most expensive rental market in the country by this summer. The median price for a one bedroom in Vancouver has hovered at $1,900 for the last three months, while Toronto's witnessed steady gains.

There may, however, be relief in sight. In addition to possible rent control measures, another recent report from Urbanation claims that rent for condo units in Toronto decreased in the first quarter of 2017.

Urbanation cites increased supply as the force behind stabilization in the market, though many would argue that the rates for condo rentals in Toronto became unaffordable long ago.

Please share this

Toronto Mega City Amalgamation, Mike Harris, 20 Years Later

Twenty years ago this month, Mike Harris introduced Bill 103 at Queen’s Park, forcing Toronto’s amalgamation with what still seems like malice. Little wonder the provincial Tories have never recovered. Toronto has become their political graveyard. But the road to governing can be greased with a little Toronto love.

Exactly 20 years ago this month, Toronto was embroiled in a civic upheaval unmatched in our memory. The provincial government imposed a controversial merger on the six municipalities that stretched from Etobicoke Creek to the Rouge River, Lake Ontario up to Steeles Ave.

The forced amalgamation of Toronto, York, Etobicoke, East York, Scarborough and North York was resisted with verve, vigour and the kind of civic passion unparalleled since the huge majority of residents (three in four) had their protests squelched.

Mike Harris introduced Bill 103 at Queen’s Park. The entire creation, it seemed, hollered “No” — in referenda, nightly vigils, legislative filibuster and with the amplification provided by every available democratic tool. To no avail. The majority Tory government carried the day. The old city was history. A new one would be born eight months later. And everywhere, the citizens vowed never to love the child born out of what amounted to a political assault akin to forced marriage.

The fight has gone out of the dog — reality never matches the warnings of doom and destruction, so people forget what they had and what they’ve lost and celebrate survival where spectacular success was possible. But look close to the surface and the wounds are only now healing.

Of course, this sounds like strange doctrine to so many. Hundreds of thousands of newcomers have since arrived. The only Mad Max mayor they know of is Rob Ford, not the original Bad Boy Mel Lastman. Ancient grievances between old Toronto and the regional government of Metro Toronto are lost on them. They don’t get the stubborn, latent whine from Scarborough that the burbs get no respect.

Market Value Assessment. A New Deal for City. Downloading. Relics of the past, yes, the very near past. Still, one rarely hears calls for de-amalgamation.

By the time the amalgamated government took office on Jan. 1, 1998, the metropolis had grown weary. And Harris bludgeoned what little fight was left by turning the bazooka on the city with an unprecedented dump of service costs and cuts on the new city, rendering it almost stillborn.

Queen’s Park used to pay close to three-quarters of capital costs and half the operating costs for the TTC. Harris advised the new government it was getting out of paying the operating costs and grudgingly supplied a diminishing percentage of the cost of building the system and supplying it with vehicles.

Housing, a social cost if there ever was one, became Toronto’s responsibility. He stopped paying for sections of highways and dumped the cost on the city. And those costs have framed the fiscal arguments for the past 20 years.

The changeover was so tumultuous and seemingly designed to destabilize the city that, in order to survive, Toronto had to pull together.

Understand, this was the time the province filled in the tunnel already being built for the Eglinton West subway — yes the very route where the Crosstown LRT is being built now. Harris said no to the Spadina extension now going up to Vaughan. He acquiesced to Lastman for the Sheppard Subway, but short-turned it at Don Mills Rd., instead of all the way to the Scarborough Town Centre.

To many reading this, it is ancient history. But there are direct lines from our current fiscal issues to those decisions. Due to heroic, sustained advocacy, much of the social service costs — minus housing — have been taken back. It was the Liberal government, led by Dalton McGuinty, that started the repair. That might explain the persistent deference to the Libs.

So was the amalgamation the correct decision? I still think so, though it has never felt comfortable to hold that view, contrary to allies on most other fronts. The union was a natural evolution of a relationship that had survived more than 150 years.

But Harris executed the act with what still seems like malice and malevolence.

This was an act of sheer terror, a hatchet job that hacked the city to near death. We’ll never know what a unified Toronto might have accomplished — lovingly spawned after a proper gestation period and welcomed into the world with the appropriate crib and balloons and care package.

Instead, we got a new municipality, grieving a civic divorce, forced to exist in an arranged marriage with a good portion of its household income stolen by the source of the upheaval.

Little wonder the provincial Tories have never recovered. Toronto has become their political graveyard.

During the provincial election next year, the Tories could win the province by sweeping everywhere but Toronto. Again. But the road to governing can be greased with a little Toronto love.

Please share this

Toronto Housing Bubble Going Nuts

Based on fundamentals? You gotta be kidding.

Residential property sales in Greater Toronto soared 17.7% year-over-year to 12,077 homes, according to the Toronto Real Estate Board (TREB). New listings jumped 15.2% to 17,052. Prices for all types of homes, based on the MLS Home Price Index Composite “Benchmark,” soared 28.6%. The “average” selling price soared 33.2%!

That average selling price of C$916,567 is up from C$688,011 a year ago. Over the past five years, it has doubled!

The heavenly manna was spread across the spectrum. For condos, the average price in Greater Toronto soared 33.1% to C$518,879; for townhouses it soared 32.9% to C$705,078; for semi-detached houses, 34.4% to C$858,202; and for detached houses, 33.4% to C$1,214,422.

Even the house price bubble in Beijing cannot compete with this sort of miracle; new house prices there increased only 22% year-over-year in February. And Sydney’s fabulous house price bubble just flat out pales compared to the spectacle transpiring in Toronto, with prices up only 19% in March.

Vancouver has its own housing bubble to deal with. But there, the government of British Columbia has tried to tamp down on wild speculation with various measures, including a transfer tax aimed squarely at foreign non-resident investors, with “mixed” success.

Now the great fear in Toronto’s real estate circles is that the government of Ontario might impose similarly cruel and unusual punishment on the participants in this spectacle. Some measures are on the table, with folks wondering how to stop the bubble from inflating further and causing even greater harm to the real economy when it deflates, as all bubbles eventually do.

They’re reluctant. It seems they want to see how BC’s measures are washing out in Vancouver. The central government too is trying to fine-tune some macroprudential measures, but they’ve had absolutely no effect on Toronto’s housing bubble. And the Bank of Canada, which has been fretting about the housing bubble for a while – always couched in its very careful terms – refuses to raise rates. Everyone is talking. No one dares to do anything real about Toronto’s house price bubble.

In Toronto, according the real estate folks, it’s all based on fundamentals. It’s based on supply and demand and very rational calculated thinking, and there is no bubble in sight, lenders are just fine, and if Canadians are locked out of the housing market, so be it, it’s just a shortage of housing, really. So TREB President Larry Cerqua is glad the efforts to tamp down on it all have not come to fruition, in part due to TREB’s vigorous lobbying:

“It has been encouraging to see that policymakers have not implemented any knee-jerk policies regarding the GTA housing market,” he said in a statement.

“Different levels of government are holding consultations with market stakeholders and TREB has participated and will continue to participate in these discussions,” he said. “Policy makers must remember that it is the interplay between the demand for and supply of listings that influences price growth.”

Singing a similar tune, Jason Mercer, TREB’s Director of Market Analysis, explained the basic supply and demand problem:

“Annual rates of price growth continued to accelerate in March as growth in sales outstripped growth in listings,” he said. “A substantial period of months in which listings growth is greater than sales growth will be required to bring the GTA housing market back into balance.”

And he told policy makers to tread carefully: “As policy makers seek to achieve this balance, it is important that an evidence-based approach is followed,” he said. This is a gravy train, and it must be allowed to speed on until the last cent has been extracted.

It doesn’t take a genius to figure out that this will end in tears. What we don’t know yet is when it will end in tears, and whose tears it will end with. But we already know: When it does end in tears, real estate organizations will first be denying it, and then they’ll be clamoring for a bailout of their stakeholders – so it will end in the tears of others.

Even the big Canadian banks are fretting. “Let’s drop the pretense. The Toronto housing market and the many cities surrounding it are in a housing bubble,” Bank of Montreal Chief Economist Doug Porter warned clients. But the bubble’s deflation would push the city into a fiscal and financial sinkhole.
Please share this