I admit to being somewhat conceited as a New Yorker. To me, New York is the center of the universe and everywhere is just a little less than my hometown. And this is coming from someone who has moved 18 times and who has lived on three continents. There’s no place quite like New York. Except, apparently, for Toronto. Toronto? Really? Toronto Real estate is going crazy, or so I’m told.
My friend Yasir Khan, the owner and creator of Wealth Kept mentioned this to me recently and I just had to check it out for myself. I mean, I’ve been to Toronto several times and don’t get me wrong – it’s a pretty city and it has a decent baseball team (though the Yanks, they aren’t) but I never thought of it as being a red hot place for real estate.
Turns out, I was wrong – Toronto is actually a much bigger draw for luxury real estate than even New York or LA. Forget Trump Tower. Forget massive homes built on spec in the hills of Los Angeles. To hear some native Torontonians tell it, ordinary people are being priced out of the Toronto real estate market by numbers that would put even Silicon Valley to shame.
So what’s Behind It All?
For those who are old enough, this will sound like a familiar refrain – Asia is behind it. Back in the 80s and early 90s, when I was growing up (yes, I know, back in the Jurassic period), it seemed like Japanese people were buying everything in sight here in New York and in LA. There was even a movie about it where they joked that the Japanese were going to buy the police department.
Of course, that didn’t last – recession hit the Japanese economy hard and it still hasn’t fully recovered. For all that the Japanese are famous savers and seemingly much more prudent with their money than spendthrift Americans, the Japanese economy is crippled by various forces, many of which are beyond easy fixes, such as an aging population which isn’t replacing itself.
Today, it seems that Toronto’s meteoric rise in real estate pricing is being driven by Chinese money. One reason for this is that it’s so much easier to immigrate to Canada than to the United States; and if one of our would be future presidents has his way, it will be harder still to move to this country and that’s especially true if you’re a Muslim.
Thoughts of a Bubble
It’s only natural – here in the USA, we were all so hyped up about our own real estate market just a decade ago that we all thought that prices would just keep on going up and up and up endlessly. People bought four and five homes with easy money from banks – homes they knew they couldn’t afford but which they figured to unload on to some future sucker.
Today, many are predicting the same thing in the Toronto real estate market – that it’s heading for a crash and that the smart money is cashing out now. I admit, I don’t know enough about the Toronto real estate market to make a prediction, but I will say this – only suckers think prices will keep rising forever.
Sure, they aren’t making more land, but at some point, prices get to be unaffordable and corrections have to come. It may just happen soon for the Toronto real estate market also.