Sorry experts, the housing market sky isn’t falling
“There is a lot of work involved in taking that press and taking the spin out of it – to put the facts into perspective and actually mitigate the sensational headlines,” said Peter Juretic, a director at MCAP.
Speculation from the Bank of Canada to Wall Street warns that prices in Toronto and Vancouver are overvalued, their stories splashed across just about every major daily newspaper in the country.
It was only last week that the Financial Post ran on a story on Canada’s housing agency CMHC warning against overbuilding after a surge in condo and apartment projects took housing starts to a three-year high.
Homebuilding now exceeds the agency’s forecast for 190,000 new households to be created this year, and suggests companies must guard against a glut of properties they can’t sell fast enough, CMHC chief economist Bob Dugan said in the report.
But RioCan’s CEO Edward Sonshine has stated that there is in fact little risk of a correction.
“Between REITs and large pension fund players, we probably own 80 percent of the real estate in the country,” Sonshine told BNN. “It’s in very strong hands, and we don’t borrow a lot. When you don’t have weakness because of debt, you’ve got staying power.”
Sonshine told reporters that a lot has changed since highly leveraged investors were more sensitive to changes in the market, contributing to the major correction in the 1990s.
“Our company was established before the big crash that everybody talks about in 1989-90,” says Juretic, “and with all the negative press out there, our investors see that.”
That change in attitude – borrowing at 40% or less of the cost of a building today, compared to 110% back in the 1990s – has contributed to the stability of the housing market.
In fact, Juretic agrees with Sonshine that the hot Toronto and Vancouver markets will not only remain hot, but gather momentum as more people are drawn to urban centres, and immigration stays on pace.
“We’ve had a steady growth. There have been some anomalies,” Juretic told MBN, “but it has been a steady climb in the market – not too much, not too little, but just right, given the phenomenal demand for real estate we have in the city (Toronto).”