Good news, Toronto! When the housing bust comes, it will suck less for us than it will for Vancouver, Montreal, Edmonton and Calgary
Griping about expensive housing is as traditional a sport in Toronto as griping about the TTC or the Leafs. In the past year or two, that kvetching has been supplemented with a healthy dose of worry over how bad the price drops will be in Toronto when the correction inevitably comes. No less than New York Times columnist and Nobelist Paul Krugman has warned, “Canadians spend too much relative to their household incomes, and the country’s housing bubble has yet to burst.” A new report from the Canadian Centre for Policy Alternatives attempts to give us some idea of what the carnage will be like. The good news is that, for Toronto at least, the drops will be relatively modest.
The increase in Toronto housing prices since their last stable value in 1998 has been moderate compared to other Canadian cities. The potential decline under [the most optimistic] scenario would be relatively small compared to other cities, with average prices declining by 9%, from $420,000 to $382,000.
Now, taking a $40,000 loss on that semi-detached in Riverdale may not sound like a walk in the park, but in percentage terms, it’s not so bad. Cities out west have it much, much worse (as does Montreal): they’re looking at declines that are at least twice as bad. Even in the more pessimistic scenarios, Toronto sees 20 per cent declines, while Calgary and Vancouver both see drops of 30 per cent, and Edmonton sees almost 40 per cent.
The CCPA looked at only one major city in Canada that fares better than Toronto: Ottawa, but of course that comes with costs, as well (i.e., living in Ottawa). Will Toronto become even more smug than before when our houses are still worth more as homes than as firewood? Only time will tell.
• Canada’s Housing Bubble: An Accident Waiting to Happen [CCPA]
• Housing bubble may soon burst: group [CBC News]
• Housing bubble threatens in six cities: Report [Toronto Sun]
• Housing prices due to fall, says think-tank [Toronto Star]