Saturday, January 28, 2017

Toronto housing fall almost certain now


There is only anecdotal evidence because everybody is clamping up.  But it looks like 30% are walking away from deposits.  A robust market might be able to survive, but an over-extended bubble might not.  And in Toronto, my observations point out that at least 30% of luxury condos are empty, due to money laundering.

So, following the Scientific Method:

Hypothesis:  The knees have been chopped out from the Toronto housing market, and the realtors are bravely covering it up.

Physics:  The hot money, mainly Chinese, have withdrawn from the market.  Although a figure has been bandied about of only 5% foreign buyers, this does not include the 'snow washing' shell companies.  The hot money was adding 20-30% to the price.

Validation:  All stats are kept secret, but there are the monthly summaries.  December sales showed a slightly larger than seasonal drop.  January should show a drop through the seasonal floor.  And, of course, further months will be more than 30% below normal.  Prices will hold for 6 months, as sellers dig in.  The hypothesis has failed if sales pick up to the normal trend in the Spring.

Extrapolation:  This is a sufficient shock to force all the speculators to unwind.  All the empty housing will go on the market in 6 months.  The prices will drop 50%.  Huge layoffs in financial services and housing construction.  New condos may be capped.

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