When it comes to dealing effectively with the crazy real estate boom/bubble in Toronto, politicians often claim they don’t have all the data. So naturally based on the limited data available, the Ontario Liberals recently announced 16 measures to cool the red-hot real estate market, but even the most optimistic person out there concedes that these measures aren’t likely to bring the cost of real estate in line with incomes or alleviate the affordability crisis.
Although most people with vested interests in real estate like agents vociferously stress that foreign homebuyers’ aren’t the problem, a foreign homebuyers’ tax has been slapped on those ‘offenders’. But they are barking up the wrong tree. Mississauga Mayor Bonnie Crombie nailed it when she agreed with real estate professionals that the majority of home purchases are domestic. The Mississauga News quoted her saying: “They all suggest that there is a lot of home buying going on, but it’s local and may be one or two cultural groups buying in a big way.”
Since no one has as yet dared to publicly name the two cultural groups, I am willing to speculate that these happen to be South Asians and Chinese.
All across the GTA and beyond, speculators from these backgrounds are by and large fuelling bidding wars, indulging in flipping and utilizing every loophole out there that makes it legal but morally and ethically questionable.
Speculators have ruined the real estate landscape
I was recently forwarded a one-minute video shot by someone at a new development which had just opened up for sale.
The couple of policemen there struggled to keep the hordes of would-be buyers in line. There was shouting, shoving, pushing and had I not known better I would’ve sworn this was a development in Gurgoan or Hyderabad, but it was in our own backyard- Brampton. And all the buyers were predominantly South Asian men.
Not so long ago, many newly-wed-couples could be seen at Presentation Centres getting information about the development. These days the only people looking to usurp, not buy as many units in any development as possible are real estate agents who are there either representing a speculator or themselves.
Because it has become so impossibly unaffordable for a large number of genuine Canadian buyers, they are more or less out of the market resigned to renting often from the speculators. The only ones out there are Indian and Chinese real estate agents, who happen to be mostly new immigrants. No wonder they are being mistaken for ‘foreign investors’. It all seems so foreign really.
This real estate speculation to me is nothing more than glorified inflation. Only a tiny fraction of Canadians will really benefit from this- Canadians with no children or those with children who’ve already bought their homes in saner times.
Earlier home sellers actually enjoyed the profits
At one time as homeowners grew older, they downsized, sold their mostly paid-up homes for a decent profit and decamped to Florida or Cottage Country. Many helped their children to buy their first house by contributing part of a small down payment and the rest of the profit went toward traveling, eating out and supplementing their pensions.
Parents feel obliged to help
These days parents who sell their homes for say a million dollars upward aren’t about to bring out the champagne, because today a typical parent feels obligated to put in an even bigger chunk of the proceeds of their profit into the purchase of homes for their children.
It would seem really obscene and callous if parents decided to keep $100,000 for post-retirement travel while their child loses his 20th bid on his first house by the same amount.
Parents today instead of saving for their own retirement are instead sinking their money into second and third properties which will be for their children. These parents may be property millionaires but will perversely be deprived of enjoying any of those riches in real life.
Just like blackmarketers in the old country
And for this state of affairs, one can really thank our own community speculators who are nothing better than good old fashioned blackmarketers. The kind that operate in the old country, for example unscrupulous blackmarketers will typically buy a commodity like onions which after it is revealed that the crop has failed, by creating an artificial scarcity they make a bad situation worse, later they calmly re-sell it to desperate consumers at five times the actual cost. This is something happening right here in the GTA, except that it has to do with housing stock which is being treated like a stock market and unless the speculator is taken out of the equation, no other measure will work, except perhaps the spectre of a significant interest rate hike.