A Scarborough bungalow is currently listed at $2.2 million, which is double the record-breaking average price for a home in the Greater Toronto real estate market. The selling agents says that price is not evidence that Canadians are sitting on a housing bubble, as one economist has recently said.
The bungalow at 129 Manse Road, in the West Hill area not far from the Rouge and the Guild, is being sold as a development prospect. The listing says the massive 119 x 112.42 foot lot has approval to be split in half so that a buyer can build two large homes on the property. RE/MAX realtor Dan Hoffman, who is representing the seller, estimates that building 5,000 square-foot homes on each lot would cost an extra $1 million each. So that’s an approximately $4.2 million investment.
“You’re looking at $2.6 or 2.7 million,” says Hoffman, predicting what each home would fetch.
There’s at least one person in Toronto who wouldn’t go for that proposition.
Economist David Rosenberg told BNN Bloomberg that Canada might be experiencing “one of the biggest bubbles of all time” and that he would “absolutely not” invest in a home in the Greater Toronto real estate market.
Rosenberg was speaking in reaction to the Bank of Canada’s announcement that they will be holding the overnight interest rate at the record-low 0.25 per cent.
He pointed out that Canada’s unemployment rate is at 9.5 per cent, which is higher than peaks during the last two recessions, “including the great financial crisis.”
In a 2021 Housing Market report, the Canada Mortgage and Housing Corporation explained the cognitive dissonance between a pandemic causing high unemployment rates and a boom in the real estate market. The report explained that the service sector, which largely employs renters, was hit hard by the pandemic.
Meanwhile, high-income households experienced little job loss but benefitted from the low-interest rates, which in turn is driving house prices higher. The average selling price in February for a home in the Toronto real estate market was $1,045,488, which is a 14.9 per cent increase over February 2020.
“Home prices are up year-over-year with practically no wage growth,” says Rosenberg, who adds that the financials behind Canada’s real estate surge looks a lot like the dot-com bubble in 2001.
Hoffman isn’t alone when he argues that there is no bubble. Buyers investing in Toronto real estate and developing properties are counting on both a reopening of the economy post-vaccine and surging demand as soon as immigration opens up.
I tell Hoffman the idea of a West Hill fetching close to $3 million sounds astronomical.
“A lot has to do with who’s buying them,” he responds, suggesting we get away from thinking the traditional four-person family with $125,000 is the only kind of customer in the Toronto real estate market.
“I’m on the frontlines and I see two families moving into a house like this,” says Hoffman. “I see people buying a house and renting out the basement for $2,000. I see a lot of gifted money. I’ve seen parents put $500,000 into their kid’s pocket for the down payment. There’s a lot of money out there. There’s a lot of equity.”
