Canada’s HOT Real Estate Market is Really a Tale of 2 Cities. Here’s what you need to know!
If you don’t live in a bubble, then you must surely know by now that the Bank of Canada, the federal, Ontario, Toronto and Vancouver government officials, the Prime Minister of Canada, the Mayors and even the OECD and IMF are sounding alarms about the Canadian real estate market.
All are setting of alarms yet none are doing anything about it.
Personally, I firmly believe that all levels of government are cranally anally inverse (yup, they have their heads up their ass!).
All they seem to do is point fingers at each other. Despite their warnings, despite their promises to study the evolving matter in the coming months so that they can then make proposals, so that they can further kick the can down the road… I highly doubt they will do anything material to cool the hot Toronto and Vancouver real estate markets.
Sure I could be wrong, but I doubt it. One thing we can be sure of is more public outcry, more political talk and very little if any meaningful action.
Here’s why:
The reality is that all levels of government have a windfall on their hands as property prices continue to escalate. This is especially true Canada’s hottest real estate markets in Vancouver and Toronto.
On the municipal and provincial levels, governments are loving the massive increases in revenues from land transfer and property taxes related to higher property values (which incidentally is masking their inefficiencies in other areas of their operating budgets).
In response to substantial public outcry and cries of real estate bubbles in the media, the municipal and provincial governments are now screaming warning flags in the news about the housing market.
But here’s the thing, what incentive do they really have to do anything about it? Other than to continue spewing bullshit to the general public and pointing fingers to the federal government to please, please do something to cool the market, while at the same time raking in the cash from their continuing windfall?
As for the prospects of the federal government “evaluating the situation” and possibly doing anything to try to cool the housing market, well that’s also a bunch of hog wash.
Just today, Finance Minister Bill Morneau hinted his government will take further steps to try to cool housing prices in Toronto and Vancouver and even the Prime Minister has called this a “crisis”.
Despite all their posturing, rhetoric and empty promises, there’s this pesky matter that the feds truly need to consider.
Sure Toronto and Vancouver markets and surrounding areas are on fire, but other markets Winnipeg are more balanced while others still like Calgary are in a downright correction.
For further perspective on this here is an eye opening Huffington Post article.
With housing and construction remaining one of the few shining lights within our already very fragile Canadian economy, any effective efforts and attempts by the feds to try to cool the housing market can very well cause the entire Canadian economy to firmly go bust, with areas like Calgary, where stimulus not cooling policies are what is required, risking total decimation.
And of course, the federal government is singing that Shaggy song “Wasn’t Me”, by pointing fingers at provincial and municipal governments to please, please do something about the crazy housing markets in Toronto and Vancouver, while they in turn are pointing their fingers at the feds.
Perhaps they should call it kindergarten instead of politics, but that is a totally different matter, so I will digress.
So here’s my take on this craziness.
(WARNING: This may not be what you want to hear, but here is why I feel this way)
I say, let the real estate market take care of itself! In fact, let it crash when it needs to.
Let’s all face facts here.
Yes, there will be a correction eventually in the hot Toronto and Vancouver markets – although doubtful anytime soon. After all, nothing goes up in a straight line indefinitely. Not stocks, bonds or ETF’s. So you should realize that it is only a matter of “when” not “if” a correction will eventually happen.
By leaving things as they are, buyers who are being forced out of the high flying Toronto and Vancouver markets will have no choice but to move to more affordable cities.
In fact, many companies and jobs have already started their exodus to save money, since occupancy costs in these secondary markets is lower than Toronto and Vancouver.
These secondary markets will then grow, expand their infrastructures, transportation, etc. thereby further creating even more jobs and stimulus to the Canadian economy. All of which will of course further increase tax revenue for all levels of government.
In fact, this is already happening and moving forward full steam ahead.
Incidentally, these are the exact markets that I along with my clients, both investors and first time buyers alike, have been targeting.
They are also substantially less risky than both the Greater Vancouver and Toronto real estate markets.
As an example, recently my clients purchased a move in ready, fully detached 3 bedroom 2 bath home with a finished basement and attached garage in a family friendly neighbourhood that is within commuting distance of Toronto, using public transit, for less than $350,000.
That’s 30% or $150,000 less than the cost of a new 500 sq ft 1 bedroom condo in Toronto!
That’s 70% less than what a similar home would sell for in Toronto in a comparable area!
So, if you’re looking to realize your dreams of home ownership without breaking the bank and wish to still keep your Toronto job or if you are an investor looking for cash flow positive properties that offer great returns with less risk than the frothy Toronto and Vancouver markets, well I am here to tell you that these properties still exist and are within your reach.
As true real estate investors and owners (not speculator) we make money by staying in the market and care little about timing the market.
In fact, even if our investments never appreciate in value and even if the Toronto real estate market were to crash today, we’re perfectly OK with that. Really!
The reason for this is simple. We know that over time we will still reach our intended goals, regardless of what happens to the Toronto or Vancouver markets in the short to mid term.
We know this because “shelter” is one of the main necessities, that is it is a need and NOT a want, in life.
So we know, their will always be high demand for the homes and investment properties that we buy, regardless of booms, busts in the economy, the real estate or even the stock market.
The same cannot be said for those speculating that Toronto or Vancouver real estate prices will continue to go up indefinitely.
The same cannot be said for those buying into the “common wisdom” of investing in stocks, mutual funds, ETF’s and bonds.
They are either deluding themselves or being sold a false bill of goods by so called experts who are either just as ignorant at best, or worse, looking after their own best interests above their clients.
I wish them all luck. They will truly need it when the house of cards inevitably falls.
So bring on the correction in Vancouver and Toronto! We can take.
In fact, we welcome it with open arms.
Until next time…
Felix
Your Chief Millionaire Maker
