[URBAN NOTE] “Toronto’s runaway housing market heading for paralysis, economists warn”
The Globe and Mail‘s Carolyn Ireland shares a warning that Toronto’s housing market is about to lock up for want of available real estate.
Toronto’s real estate market is heading toward a state of paralysis, says Chris Kapches, president and chief executive officer of Chestnut Park Real Estate Ltd.
Mr. Kapches says the shortage of listings prompted house hunters to head out in force in January. They were also making quick decisions. Properties for sale sold in 19 days, on average, Mr. Kapches says. In the same month last year, the average was 29 days. Mr. Kapches reminds clients that 2016 was already a record-breaking year – including in the “days on market” category.
One reason existing homeowners aren’t listing their houses for sale is that the cost of moving is so high. It takes a huge investment to make the jump to a larger property or a more coveted location. There are commissions and legal fees to pay. Land-transfer taxes are levied by the province and the City of Toronto.
Bank of Montreal is not backing down from a call that residential real estate prices in the Toronto area are moving too fast: economists at the bank are comparing prices to a runaway train.
BMO recently urged market watchers to drop the pretense and acknowledge that Toronto’s housing market is in a bubble.
Chief economist Douglas Porter explains he made the bold call to reinforce the message that the market has lost contact with economic fundamentals and has the potential to become dangerously overheated.
“This is not a near-term call on the market,” he stresses – “in fact, given the outlook for interest rates and an improving underlying economy, there’s nothing obvious to meaningfully slow the market at this point,” Mr. Porter says in a note to clients.
It’s in that context that Robert Kavcic, senior economist at BMO, probes the calls by some industry players to remove part of the Ontario Greenbelt, “as if that would be a magic bullet to slow the recent pace of home-price growth.” Mr. Kavcic says it’s unlikely that would be the case.