The campaign

So how, an anxious nation asks, have things been in Tranna lately? Aside from some guys running around in shorts making millions… pretty tepid.

Not that you’d know it from the media, of course. “Sales come storming back,” was the real estate message broadcast to six million souls. And that made the agents happy. They need all the joy they can get, since the majority of them have been slowly but steadily starving.

The stats reported by the property cartel this week showed an 18% increase in deals done during May over the same time last year, and a 3% gain in overall prices. That sounds good. And compared to the dismal rutting season of 2018, it’s definitely an improvement. We know why, of course. Mortgage rates have tumbled along with bond yields, and five-year money is now available to everyone except reprobates for 3% or less. Close to historic lows.

Second, we’re another year past the market-cooling measures of the now-defunct Wynn government. Over time people learn to cope with their disabilities. Third, the moisters are a year older and house-hornier, and since first-timers make up about half the entire market more activity’s not a surprise. And fourth, governments are pimping again.  The federal budget of a few weeks ago increased the RRSP home buyer’s plan to $35,000 a head, and we just heard about the shared-equity mortgage. Yay! Justin’s buying me a house…

Meanwhile prices are still lower than they were two years ago. Condo sales in the core have actually dropped and if you have cash and swagger, there are great deals to be had picking up a 905 particleboard McMansion.

In terms of the gold standard – a detached house in the 416 – the average price in the spring of 2017 was $1,503,868. Now the same place sells for $1,384,993 (virtually unchanged from last year). That’s an 8% drop. But because houses cost a lot of buy (land transfer tax) and sell (commission), the decline has been more like 16% over the last 24 months, or a loss of $248,125. Since people buy houses with after-tax dollars that’s a nasty ouch. Apparently real state does not always go up. Who knew?

Having said all of that, it’s worth remembering real estate values in demand areas like the inner GTA are highly unlikely to see a collapse. So good luck waiting for one. This pathetic blog has said so for a few years, and we’re stickin’ with it. Demand remains robust, the demos favour housing, money’s remained cheap and the costs of building/renovating/developing are crazy. (The same would apply to Vancouver/Victoria, of course, if it weren’t for the Dipper anti-real estate campaign and taxation orgy.)

So should an eager little cabbage charge off and buy in Toronto, taking advantage of these low mortgage rates and slightly-reduced prices?

Sorry, but there’s no blanket answer. Renting (yes, even at these lease rates) is still far cheaper than owning. Without annual capital appreciation there’s just no reason to take the plunge into debt, condo fees, property taxes, insurance and utilities. Get over it.

So, as always, buy if you can afford it and becoming an owner doesn’t gut your liquid assets or put all your oeufs in one basket. The big change now is that real estate  – even in dribble-crazed Toronto – isn’t a slam-dunk investment the way it was for your parents. If the most in-demand houses in the entire country can fall in value for two years, then they can flatline for ten. Mr. Market doesn’t care about your finances, instead being molded by the economy, the cost of money, consumer sentiment, supply and politics. Just look what a bunch of stupid taxes have done to home equity in YVR.

While sales in the GTA have improved from the pit of 2018, they remain below the 10-year average. There are tens of thousands of new condo units in the pipeline which will be hitting the market in the next three years. And while the Trumpster’s antics have crashed bond yields and helped make home loans cheaper, you might be shocked at how that will change in 2020. Meanwhile Ontario is the most indebted sub-sovereign state on the planet, so guess which way taxes are ultimately headed?

In short, kids, don’t gamble. Do not be swayed by the realtor-media ‘the market’s hot’ campaign. Goebbels would be pleased with it. Even Sarah Hucksterby Sanders.

Remember that rent = freedom. There’ll be plenty enough time later for entrapment. Trust me.