Toronto’s housing forecast according to Garth Turner, the Dr. Doom of real estate

Toronto’s housing forecast according to Garth Turner, the Dr. Doom of real estate

Turner outside his Caledon home, a former inn built in 1855

If the Toronto real estate market has nine lives, so, too, does its most famous prophet of doom, Garth Turner. Over a 40-year career, Turner has worked as a journalist, a broadcasting entrepreneur, a newspaper chain proprietor, a hotel and restaurant operator, twice as a federal MP (including a stint in Kim Campbell’s short-lived cabinet), a PC leadership candidate, and a financial author and speaker (or, as his critics put it, “seminar shill”). Most Canadians still know him best as the rebellious member of Stephen Harper’s government who was kicked out of caucus in the fall of 2006 for blogging about party business, then crossed the floor to join the Liberals.

Turner, you may be surprised to learn, is also a self-professed real estate junkie who over the years has bought and sold—very profitably—about 50 commercial and residential properties; he moved four in 2011 alone. But as he has watched prices and consumer debt levels soar, especially in Toronto and Vancouver, he has come to see the housing market as a grossly distended balloon that will—any day now—explode, raining debt and misery on the Canadian populace. Each delay to the inevitable reckoning, he argues, more deeply entrenches our delusion that the real estate boom—“the biggest bubble economy in history,” as he puts it—can continue forever, and leads a few thousand more naive young couples to sign five-per-cent-down mortgages on wildly overpriced fixer-uppers in Leaside or Riverdale. “The real estate correction will hurt,” he warns, “and the longer this thing goes before it tips, the more pain there will be.”

His fans gobble it up. His blog,, clocked an impressive five million visits last year, and the number keeps growing. Those who comment—the site elicits 50,000 comments a year—tend to be regulars, even addicts, who gleefully offer sentiments like “We are so screwed!!!” He’s written 14 books, most of which are largely devoted to the real estate mania. His speeches—he once gave 200 a year—regularly draw standing-room-only crowds. Last fall, when Turner advertised a speaking engagement in Toronto on his blog, 1,200 people packed an airport Hilton. He relishes the opportunity to meet his readers. “They’re cynics,” he says—people who distrust the MSM (that’s “mainstream media”), and especially what he calls the real estate industrial complex. “They’re a tough room.”

But they do trust Turner—even though he has been unsuccessfully calling for a housing slump for years. In 2008, it looked like he’d nailed it when the release of his book, Greater Fool: The Troubled Future of Real Estate, was followed by a steep drop in prices, including a 10 per cent plunge in the GTA that October. By the following spring, however, we had shaken off the jitters and piled back in, sending home prices higher than ever.

Turner is bound to be right one day—many economists agree on that. In fact, when you look beyond his bluster and often piquant language, Turner seems downright moderate. That’s because he recently entered a new phase in his evolving career, becoming a partner in Turner Tomenson and Associates Family Wealth Management. Now that he’s betting other people’s money on his views, accuracy is much more important, and controversy, long a boon for his career, has become a liability. Self-serving hyperbole and a huckster image could torpedo his newest venture.

There is a striking disconnect between Garth, the online crusader against excessive debt, and the Hon. J. Garth Turner, PC, investment advisor, as his current business card reads. Striding into the boardroom of his dark-wood-and-pleather office in a business park on Yonge Street, just south of the 401, he resembles a small-town lawyer: slightly rumpled suit, shaggy hair, amiable manner. While on his blog he rails about “dumbass [interest] rates” and “the whackjobs in the Tea Party,” here he speaks in measured tones about the importance of diversification and taking a “holistic approach” to your portfolio. But he still indulges in the naughty analogies he knows play well with his public. And, at 62, he seems to find his new job a hoot. “Money is more important to people than sex,” he says with a mischievous smirk, his voice lowered to a stage whisper. “It’s incredible how intimate they feel about their finances. They tell me everything! I’m like Dr. Phil.”

Although he has long been proffering opinions about managing money, he’s only been licensed to advise individuals for less than two years. Wealth manager Scott Tomenson met Turner in March 2010, and decided he could use a business partner with “marketing capability.” That he got: since Turner and his partner launched the firm a year and a half ago, assets under management have grown to $150 million.

People seek him out because they think he tells it like it is, and the first thing on their minds is usually real estate, and whether they should sell. Turner makes one thing clear: there is nothing wrong with home ownership per se. He owns a home in Caledon, a former inn built in 1855 that he and his wife restored at a cost of hundreds of thousands of dollars. (He calls heritage properties—“musty old buildings full of mould and creatures”—his personal fetish.) “We all need a place to live,” he observes. “But we have allowed that one asset to overwhelm everything else. All of a sudden, people wake up and 90 per cent of their money is in one thing.”

Since median household incomes have been largely flat over the past few years, the surge in home prices has been driven almost entirely by cheap credit. In the U.S., the spike happened after 9/11 and lasted four years before it crumbled. In Canada, the dangerous rush into real estate dates back to April 2009, after the stock market hit bottom and mortgage rates came crashing down. “People said, ‘Crap, where am I going to put my money? I don’t trust stocks, I don’t trust bonds, I don’t trust those greedy bastards in New York and on Bay Street,” Turner says. “Mortgages are at two per cent. Houses are safe.’” The brief introduction of 40-year amortizations and zero-down mortgages—“our own version of subprimes”—lured in many people who had no business owning property.

“The correction will hurt,” he warns, “and the longer the market goes before it tips, the more pain there will be”

Turner points to three reasons why this is a serious worry. First, the size of down payments. Today, the average Canadian puts just seven per cent down on a home. “If the market slides even 10 per cent,” says Turner, “these buyers will be underwater, their sliver of equity wiped out. That’s what so decimated the American middle class.” The second danger Turner sees is the aging population. The eight million Canadian baby boomers have been notorious real estate obsessives, with trophy houses sporting acres of granite and stainless steel, but few liquid assets. As they increasingly head into retirement, more and more will sell their properties, depressing prices.

Then there are the interest rates—they’ve been at historic lows since early 2009 as Bank of Canada governor Mark Carney tries to cajole the economy back onto a growth path. Carney has been hinting about raising rates for months, but he backed off again in September, spooked by the U.S. economic spiral. This was terrible news, argues Turner, because it encourages people to borrow. Although raising rates could be painful for mortgage holders, it would at least deter others from committing to investments they can’t afford. Canada and the U.S. now have very different economic problems: Americans, scared by the housing crash and jobless statistics, are not borrowing enough; Canadians are still borrowing too much.

Canada today has a higher rate of home ownership, at 70 per cent (68 per cent in the GTA, though some suburbs run as high as 88 per cent), and higher debt levels, at almost $1.50 for every dollar of disposable income, than Americans did when their housing market melted. When Turner cites such stats, he seems to taste their astringency. “I don’t know why people don’t look south to a country most in the world like ours,” he says. “How arrogant are we?” It wasn’t rising interest rates or job losses that destroyed that economy, he argues, but the drop in house values, which wiped out people’s net worth and confidence in the future.

“So we have to ask, what could cause the Toronto real estate market to go down?” he says. “It doesn’t necessarily take external shocks. Real estate goes up for emotional reasons. People get horny about houses. Well, it turns the same way.” (His 15th book, now in progress, will be about behavioural finance and how our hard-wired psychology influences our financial decisions.) The insistence that Canada is somehow uniquely immune to a downturn gets him particularly exercised. On his blog, he compares the gullible optimists to the victims of the iconic tulip bubble in the Netherlands four centuries ago: “Like your Dutch ancestor said in 1636 while looking at a bitchin’ bulb—what’s to worry, Hans? It’s different this time.”

Turner’s prediction of a coming market correction isn’t, in itself, controversial. We do have too much money stowed in our homes, and asset diversification is the sine qua non of Investors Group or Trimark brochures. Turner doesn’t actually claim we’re in for a U.S.-style rash of foreclosures, because Canada has a different system. Instead, he projects a 10 to 15 per cent decline in house prices, followed by a flatline or a slow decline for several years. (In-demand areas, like downtown Toronto, will see a much more moderate decline.) That’s not far off from what the major banks’ economists foresee. Benjamin Tal, the deputy chief economist at CIBC World Markets, for one, expects real estate prices to fall around 10 per cent in the coming years.

The difference between Turner and Tal lies in the fallout they envision. Tal thinks the likeliest scenario is an orderly correction during which prices slowly drop. Things are already cooling off, he says, with new mortgages rising at half the rate of two years ago. And while young people are still borrowing heavily, older people are paying down their debts. “I can understand why people are worried,” says Tal of housing market bears. “The headlines are disturbing. But I say, show me the motivation, show me the triggers” for a disastrous crash.

Turner argues that even a gradual correction would destroy many people’s finances, especially those who got in at the peak with little money down and few other assets, and those nearing retirement who have most of their net worth tied up in their homes. “If you’ve made money, why wouldn’t you sell when the market’s robust, take your tax-free gains, maybe rent for a couple of years?” he asks. As for those who are financially stable and aren’t looking at their home as a short-term investment—hey, don’t worry about it, he says. But the nuance disappears on Turner’s blog: “If you have a real estate capital gain and don’t crystallize it now, you could successfully impersonate a bag of hammers.”

Turner’s acerbic comments have ticked off many people. Hackers have sabotaged search engines to prevent them from linking to his blog, and his site has crashed several times, destroying part of the archive. Naturally, his critics love to point out when he’s wrong. Last summer, he linked to a market commentary by George O’Neill, a broker in the Beach, after O’Neill predicted a price rise in the area. “Sadly, many souls are being led astray by realtors like this one in Toronto,” Turner snarked. Within hours, O’Neill’s site was flooded with Turner acolytes deriding his predictions. In the end, O’Neill was right—median prices rose five per cent that fall. “It doesn’t take a rocket scientist to predict that,” says O’Neill, who posted a video explaining why he disagreed with Turner’s predictions. “The real estate market is very cyclical: summer months slow down, and in the fall we see more activity.”

Perhaps the most frequent slam against Turner is that he’s a fear monger who profits from the anxiety he sows. His current day job, says O’Neill, gives him a self-serving motive for steering people away from real estate. “He would benefit if people believed his predictions, took their money out of real estate and put it into his practice.” Perhaps the most vivid example of Turner’s now-disowned extreme views is his 2009 book, After the Crash: How to Guard Your Money in These Turbulent Times, in which he presented three future scenarios, one of which was a Mad Max world of ghost suburbs, gas and food shortages and surging urban crime. Around that time, he launched, a website dedicated to selling domestic electricity generators and survivalist gear.

Turner says only an ideologue wouldn’t change his views with the times. Yet it’s also clear that he relishes the combat—and he writes well enough that few can match him online. As a former politician and newspaper columnist, he knows that colourful sound bites and strong views are essential attributes of a popular pundit. “He’s a master of feeling out public sentiment and seeing how he can monetize it,” says Ben Rabidoux, a college professor who runs the Economic Analyst blog and shares Turner’s take on housing, if little else. Indeed, since Turner became a professional financial advisor, his blog’s content has shifted toward investing counsel.

Turner knows that people who took his advice three years ago have forgone tens of thousands of dollars in paper profits. “All I’m trying to do is point out risks to people,” he says. And those risks are growing every day. He believes parts of the 905 belt around Toronto—Whitby, Brampton, Oshawa—have already peaked. In fact, he reserves his darkest forecasts for the suburbs, the energy-hogging enclaves of outsized fortresses that house his former political constituents. He hopes that the coming downturn will burn off the consumptive excess and usher in “frugal cool,” where people flock to small, solar-powered homes.

He may be wrong about that, too. But as long as his predictions occasionally stick, he’ll have no shortage of acolytes, or adversaries. “I’ve been controversial through most of my life, I can’t seem to get around that. Not a lot of people think benignly about me.” He offers one of his smirks. “Makes for an interesting life.”