A bungalow is listed on the Toronto real estate market for nearly $3 million

More economists are recommending tighter mortgage rules and new taxes to bring down sky high home prices


A two-bedroom Toronto bungalow is listed for $2.9 million, adding more fuel to the argument that the real estate market in Canada is sitting on a bubble.

The tiny Etobicoke bungalow in the city’s southwest corner is currently a rental property, according to the listing, which states that tenants are currently paying $4,400 per month. The listing describes the surrounding Alderwood neighbourhood as an up-and-coming neighbourhood in the overheated Toronto real estate market.

Last month, the Canada Mortgage and Housing Corporation warned in its Housing Market Assessment that the national real estate market is at risk, singling out Toronto as the most vulnerable among the urban metropolises.

Canadian economists like RBC’s Robert Hogue and BMO’s Robert Kavcic and Benjamin Reitzes have urged a response from governments to cool a housing market that is on fire.

In their month-end special report, BMO’s Kavcic and Reitzes say the key to the issue is “market psychology.” While development policy has created a shortage on the supply and affordability side – creating the so called “missing middle” – the economists argue that buyer and seller speculation is adding fuel to the fire. They cite Mortgage Professionals Canada’s recent survey, which reported that people are more confident than ever that home prices will gain in value and mortgage rates will remain at their historic lows.

“The action needed today is one that immediately breaks market psychology and the belief that prices will only rise further,” says the report by Kavcic and Reitzes. “That would dampen the speculation and fear-of-missing-out that those expectations are creating.”

Kavcic and Reitzes make a number of recommendations including further tightening of mortgage standards, a national non-resident tax and limiting equity borrowing.

They consider whether the Bank of Canada should either hike interest rates or back off its commitment to hold near-zero rates until 2023, though they also acknowledge that such a move could have a negative impact on post-pandemic economic recovery.

They also call for measures that would eliminate blind bidding in real estate transactions, so that buyers could make more competitive offers rather than overreaching to win and setting new expectations for the market.

Kavcic and Reitzes echo Hogue’s controversial suggestion to introduce a capital gains tax on primary residences, though their recommendation is embedded in a more complex scheme to disincentive speculation.

Non-primary residences would have a new speculation tax added to the current capital gains rate. Meanwhile, primary residences will have to pay the new speculation tax as opposed to the current capital gains rate. The special capital gains tax would gradually fall to zero over a five-year period. That means it won’t affect buyers purchasing a long-term residence for themselves.

If the market is left unchecked, buyer and seller confidence will continue to lead to listings where bungalows are listed for $2.2 million in West Hill, $2.6 million in Pickering or $2.9 million in Etobicoke.

All of these bungalows sell their large lots to incentivize speculators and developers. The latter property in particular recommends the lot could be used for commercial redevelopment. Potential buyers can only make appointments to walk the land so that they do not disturb the current tenants.

The Toronto real estate market is so hot that you could list a bungalow and the land that it’s sitting on for nearly $3 million and expect potential buyers not to care to see inside the home.

@nowtoronto

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16 responses to “A bungalow is listed on the Toronto real estate market for nearly $3 million”

  1. Wow…$3mm great price and a good starter home for me and my family. I’ll just take that $25k first time home buyers credit from my RRSP, and with a but of savings, I should be able to get my mortgage payment down to 12,000 a month. That makes sense? Right?

  2. With the drop in interest rates, and if someone is paying over a 25 year mortgage as opposed to cash, the buyer is essentially paying the same amount. The difference is the interest payments before the interest rate drop were going to the lenders and now the savings in interest rates are going to the asset holder or homeowner.
    If rates go negative, like Europe, expect another upward surge in prices.
    Since America destabilized Hong Kong many HongKongers are fleeing to Canada and selling their multuimillion$$$ 700 sq ft condos, so a 2 million$$$ bungalow in Toronto is cheap! As the West continues to destabilize nonwest countries immigrants will continue to flood into Canada.

  3. To be clear>The difference is the interest payments before the interest rate drop were going to the lenders and now the savings in interest rates are going to the asset holder or homeowner.< the asset holder or homeowner I refer to is the seller of the property. So, instead of 100's of 1000's in interest payments over the life of the mortgage that were going to financiers they are now going to the owners of the assets or homes with the increased home price and in most cases to a homeowner when the sale is completed–which is preferable than the $$$ going to the financiers! Though the asset costs 30% more the decrease in interest rates means over a 25 year mortgage the buyer is basically paying the same amount! For now the RE market is balancing to lower interest rates and we'll see if rates stay the same if prices continue to surge higher or plateau.

  4. Don’t expect much of a rise in interest rates. If the Bond Vigilantes continue to push the belly of the yield curve higher expect Fed intervention with yield curve control, something similar to Bernanke’s operation twist where the Fed buys longer dated maturities like the 10 year. Just too much debt by Gvts of all levels, corporations and individuals for the Central Bankers to allow interest rates to rise. Quantitative Easing or printing 10s of trillions in fake fiat currency to keep banko gvts and economies operating is all that’s left. They will keep debasing currencies until they have a currency crisis and rampant inflation as the alternative is crashed economies! So 10’s of trillions in freshly printed fake fiat currency inflating the $$ supply expect hard assets to surge!

  5. Actually if you read the IMF report on Canadian housing market it states housing prices in Hamilton, Toronto, and Vancouver started to dramatically deviate from values supported by underlying economic fundamentals around 2015. It further states:

    The increasing price-to-income, price-to-rent, and loan-to-income ratios in Canada are predictably driven by the decline in mortgage rates and households’ willingness to keep their debt-service-to-income (DSTI) stable. With lower interest rates and an unchanged mortgage- payment-to-income share, households can borrow more for their house purchase. The analysis suggests that the decline of mortgage rates has significantly contributed to the increase in house prices, as households’ increased borrowing capacity gets promptly priced in by the market.

    Basically Canadians love to buy real estate and not afraid to take on debt, especially when mortgage interest rates are low. All of this behaviour drives up housing prices as the market absorbs this into the pricing.

  6. I don’t know why the home market use blind bidding. This way only encourages the bubbles up up up until the market over heat and completely out of control.

    Why is this way fare? I really don’t understand? When and why it came from? If you see the biddings in the construction industry, all the biddings are sealed in the envelope and let the owner to open them and choose whichever more benefits to their trading. That’s the only fare way for buyers and sellers. It never had the 2nd, 3rf,4th rounds for bringing up the trading price. And this won’t give any chances to the real estate agents to play some tricks in the grey zone for the sellers. I think our government absolutely should regulate the market like this.

  7. Maybe you should state the the property is actually zoned commercial, not residential. It’s articles like this that fuel the fire. Commercial values are much different from residential, give all the facts not just those that support the headline, especially when the headline is misleading.

  8. This is clearly a property for redevelopment something the article doesn’t state. At 2.9M for a severable lot although a bit steep is not that over priced. Pay attention people there is alot of money in this city and when you go to other major cities the prices are no different. Go live in Hong Kong or Manhattan

  9. The price only makes sense if the property is also zoned for commecrical purposes or will be zoned for commercial purposes in the future. The bankrupt idea of a capital gains tax on primary property will ruin the retirement plans if so many seniors and we know wgat happened to Margret Thatchers conservatives when they came out with the idea of a poll tax in the Uk. Political suicide.

    Why dont we think outside the box, give capital gain exemptions for all properties for say 3 years, you will flood the market wiith so many properties that will bring the prices down significantly. These are unique times because of the pandemic and the resultant low interest rates, you need unique solutions

  10. Misleading headline. The land is zoned for commercial, the value has nothing to do with the house which will be torn down.

  11. Total Insanity! I’ll bet there’s a greedy real estate agent behind the price. Insanity!

  12. Real estate prices should be allowed to go even higher. Hard working Canadians who paid taxes and raised families for decades should be rewarded upon retirement. Besides, plenty of affordable housing in Timmins and New Brunswick.

  13. Did you read more details why the price is so high?

    It is offered as commercial redevelopment, so if zoning is right, someone can build a commercial building or whatever it allows.

    People are not so stupid to overpay that much if it’s not worth.

  14. Why can’t they but new houses for cheaper prices, instead of buying poor houses for millions. May be in future only millionaire’s only can afford in Canada. Middle-class and poor calls must leave the country. Better to live in USA. USA Is the best place to live on this earth. Canada population is just 35 million. And cost of living is worst. Waste country to live. Cold place

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