Toronto's housing bubble is not Stephen Poloz's problem

It never was, and it will never be one.

Pressure builds on Bank of Canada to tackle house prices by raising interest rates

Bank of Canada Governor Stephen Poloz said this month that 30 per cent gains in Toronto house prices are not sustainable and have been driven in part by speculation… Financial Post

And here is a smart Alec commentary by Bloomberg,

Canada Must Deflate Its Housing Bubble

Canada’s housing market offers a case study in a contentious economic issue: If a central bank sees a bubble forming, should it act to deflate it?

No idea. But fret not, because Deutsche Bank advised,

Mr. Poloz, Toronto’s housing bubble ‘is not your problem’

Some observers have suggested Bank of Canada Governor Stephen Poloz raise interest rates to deflate Toronto’s housing bubble. But, Mr. Poloz, Deutsche Bank says “Toronto is not your problem.” As The Globe and Mail’s Barrie McKenna reports …

And some smart Alecs believe real estate speculation in Canada is never a conspiracy by foreigner speculators. It’s a completely home brew, home made phenomenon …

Canadian Speculators, Not Foreign Money, Are Driving up Home Prices

Far from stopping speculation, Canada appears to encourage it. Historically low interest rates set by the Bank of Canada make it relatively risk-free for speculators to borrow large sums of money and invest in real estate – driving up prices  …TheTyee.ca

 

It really doesn’t matter whether the real estate frenzy is driven by relatives of China’s President Xi Jinping, or it is manipulated by Joe-Next-Door. As witnessed and anticipated, Bank of Canada has never raise interest rate since Mark Carney’s era. Expecting Stephen Poloz to do otherwise is actually not very wise.

 

As you probably are aware, taxpayers paid Mark Carney $ millions in perks and salary just to do one thing – Slash interest rate to almost nothing, and nothing else.  And after Mark Carney “ran” to UK to do exactly the same thing … Google what do Brits think of Mr Carney The Dragon Slayer (in this case, the “Dragon” is the Interest Rate).

 

Anyway, back to Stephen Poloz. As a typical member of the Government of Canada, it’s anticipated he will maintain the status quo – did nothing other slashing interest rate … untill there is too much complaints – Housing Bubble, Inflation & No Pay Rise, so on and so forth, except Mr. Poloz does have another trick, nothing new, just no more slashing interest. But just like Mark Carney, don’t expect him to jack up the interest rate either. Certainly not anytime soon.

Sorry, Mr. Poloz doesn’t know how to handle that kind of situation (raise intereste rate). Not yet.

 

That explains the rationale why interest rate is likely to stay put (in the foreseeable future)…

Uncertain outlook keeps Bank of Canada firmly on sidelines for now CBC.ca
Bank of Canada holds rates, sees no cooling in housing yet  Yahoo News Canada 

Highly Cited: Bank of Canada maintains overnight rate target at 1/2 per cent Bank of Canada

Anyway, times are still good. Forget about the interest rate … Get into the market before the Dragon spits out her scary fire again.

Seeing is believing…

SOLD

22A Birch Avenue – SUMMERHILL

4+1 bedroom, 4 bathroom town house at 22A Birch Avenue in Summerhill.

This townhouse was listed at $2,885,000. It sold about 2 weeks later for $2,850,000.

($35,000 less than the asking price is not exactly a discount. It’s pittance sum when the asking price is close to $3 millions).

In another word, this townhome sold for asking – close to $3 millions.

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Next,

SOLD

147 Lisgar Street – BEACONSFIELD VILLAGE

($500K over asking)

4 bedroom, 5 bathroom semi with a detached garage on a 20 x 136 foot lot at 147 Lisgar Street in Beaconsfield Village (Little Portugal).

In July 2012 it was listed $1,195,000 and sold a month later for $1,200,000.

The house was asking for $1,699,000

Guess how much it sold for?

$2,100,000

Which is about 12% increase in price or $500 grands more.

In today’s market… not so crazy. Especially for a house that is has been tastefully renovated.

__________________

Here is another one near the jail, the mental hospital (and the East side Chinatown) …

SOLD

211 Bain Avenue – RIVERDALE

4 bedroom, 3 bathroom house with a 1 car detached garage on a 17 x 115 foot lot at 211 Bain Avenue in Riverdale.

It was a house that used to look like this in 2009…

So, they gutted the place and added a third floor.

Looks like a good reno jo, except the first floor felt really small.

Otherwise, it was a dream house … sorta.

It was listed at $1,790,000, and the price was raised to $1,890,000.

I expect it to sell closer to $1,950,000.

It didn’t. But it did sell for what they were asking for …

$1,890,000.

See, not a single home was sold less than asking.

So, the banker was right, “Mr. Poloz, Toronto’s housing bubble is not your problem”. Trust this is probably what Mr Poloz wanted to hear after all – Everything is fine and dandy. The sky is blue, roses are blooming … and enjoy the summer.