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Fwd: TO Property Market Is Going To Tumble Down!

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Freshman Member
May 30, 2002
FYI … Lynn

--- [email protected] wrote:
> Date: 27 May 2002 18:38:46 -0000
> From: <[email protected]>
> To: [email protected]
> Subject: RE: Toronto Property Market Is Going To Tumble > Down!
> Hi Lynn, Sharon forwarded to me an article concerning the > property market in TO …
> ==========
> The economic gurus are predicting a property slum (a real > hard one this time around) will most probably take place as > early as in summer 2002! As a matter of fact, virtually all > insiders in the business do know a sharp turning is imminent > as the property market has simply gone too high and for too > long, except no one could tell for sure when the fall will > actually take place.
> If so, why do Torontonians still rushing to bid for properties > of all kind that are priced so outrageously high? While there > are many factors causing the unusual phenomenon (high > demand during a recession), ignorance and desperation are > seen as the main driving force as commented by Dr. Richard > Long of Metropolitan Research Institute. “The logics behind > the rush are not difficult to understand” said Dr. Long, “It all > started upon collapse of the securities market when vast > amount of liquidity is diverted from various financial > institutions including TSE, NYSE and NASDAQ to what was > traditionally perceived as the safe haven – real estates. That > was more than a year ago and what followed was the tight > rental housing directly due to influx of new immigrants who > came into the country in record number, particularly from > such places as China and India. The Asians are known to be > lovers of fixed assets, which are historically a good > investment vehicle to count on for growth and security. > According to unofficial statistics, many of the new immigrants > have capitalized on the tight housing supply by buying up > houses just to slice them into pieces (illegal multiplex) and > lease them out to fellow immigrants. Such practice has been > proven to be viable and have sustained many immigrants > who typically are unable to secure a proper job in a tough > place like Toronto for the past many years. However, things > may soon change so drastically that those who have been > living on rentals from illegal multiplexes may soon wake up in > despair as the rental income they used to enjoy may longer > be there anymore or perhaps at a far lower rate. How is that > so? “It all boils down to basic demand and supply. First, more > and more people will join in to contribute to the supply side > by becoming landlords while the number of new immigrant is > diminishing fast due the recent change in immigration policy. > Second, more and more houses will be up for sales because > more and more people will not be able to afford their > mortgage payment as interest goes up while the job market > is deteriorating (don’t forget, recession is in place at the > moment) and the fact is banks will also tighten the credit as > the business become riskier, meaning you will have to fork > out more deposit and this will effectively barr most people > from buying. Third, panic selling (in line with > Murphy’s > Law) as witnessed during all economic downturn will cause > the price to tumble so fast that under normal circumstances, > the profit you have accumulated for the past many years will > be completely wiped out in a matter of weeks. Fourth, house > prices will become affordable again during the downturn and > this will eat into the already sluggish rental market and fifth, > the equity market is already attractive and will be more so, > why would the smart investors (provided you have the cash) > waste time with the about to tumble hard asset, instead of > the too good to be missed equity market?”.
> It appears prolong recession is the main reasons (the small > improvement Canada has experienced recently is only a > temporary correction and our economy will eventually reflex > what is happening down south of the border, which remains > gloomy) and the change of our immigration policy, which is > highly damaging as it essentially stops the cash-rich > immigrants from landing here, as the next biggest factor. > Another factor why Dr. Long is predicting the property > market will soon belly up is that no economy can sustain > without fundamental support ie. majority of the people > simply can’t afford to buy a house anymore and worse. Those > who have bet on rentals as a mean of living may soon find > themselves living on their own, if they do not lower the rent > because the prevailing building frenzy will not just leveling > out the basic demand, a glut is more like it! Imagine these > once comfortable landlords were to lower the rent and worse, > the interest rate must go up as a natural cause to combat > inflation which is another immanency down the road … which > means they won’t be able to cover their mortgage > commitment and in the long run … bankruptcy may be the > only word bespoke the situation.
> The next question is will there be a chance that the property > price will just go on rising for the next few years? > “Absolutely, anything is possible; however, our economy is > going to get into real serious trouble if the property price > keeps on going against the tide. In any case, we would have > to face a slum eventually, just a matter of time. The earlier it > takes place, the milder will be the effect. So it is advisable for > the bureaucrats to let the pain happen now than later. While > a price drop in the form of a slum is disastrous, it is > nevertheless good for the economy (particularly if it is just a > mild correction) as artificial control will only create a time > bomb that will eventually explode. Like everything in this > universe, things must be in equilibrium.”
> Dr. Long also predict the coming downturn may stay on > much longer than the previous one because there is no > apparent economic stimulants to drive the economy like IT > did in the 90s. Impact of IT as an economic stimulant will be > much milder than before as the segment is relatively > developed, although IT will still be a growth segment.
> So, what is the solution? “Sell before it is too late, the world > will adjust upon itself and no man can stop that for sure, > certainly not in the long run” said Dr. Long. What about those > thinking of buying one at the moment? “These brave people > are no different from the heroes who have bought Nortel > stocks at $120 a piece. While I am not suggesting the > property price will dive to $4 a share (Nortel’s current price), > it won’t be surprising to see the property price to depreciate > more than 50% during the next few quarter. As a word of > advice, stay put for a while … patience does pay! Need a > yardstick? Just ask the living proof of the financial world - > The legendary Sir Templeton, who is one of the very few > financial guru who is able weather economic ups and downs > for decades and his portfolio has always been the bluest of all > blues. Guess what? His secret is none other than the simplest > rule of the thumb in the world of investment … Buy Low, Sell > High! You can never miss the boat because the property > market is always there and unlike developing countries where > there is a possibility of property price rising for decades and > to a level that is beyond reach by most people. On contrary, > Canada is well developed and therefore, there is no room for > growth like some places in the third world. Remember, > whatever goes up must come down and the higher it goes, > the harder it falls. ”


Elite Member
Jan 16, 2002
Professional Status
Certified General Appraiser
This story is just another example of a Liberal Western democratic country in action. The government’s policies screw up the economy, then they go into action by making more policies to prevent it from happening again, then the new policies cause the next calamity, and so on ad nauseum. The next step in Canada will be regulation of appraisers with their own version of USPAP because after all, if the appraisers had done their job this never would have happened. Then after things stabilize a new cycle will start and appraisers will be making time adjustments based on value trends and ten years later they will be right back where they started.
All Liberal Western democracies are crisis driven. They create a crisis with bad policy, react to the crisis by creating the environment for the next crisis, and the cycle is continuous. The secret is to stay ahead of the curve and learn to milk the system, like selling continuing education to prevent the crisis from happening again, and then continuing education racket becomes the next crisis because it is not getting the job done…… and so it goes.

David C. Johnson

Senior Member
Jan 15, 2002
<span style='color:darkblue'>Lynn,

Welcome to to the forum.

I have quoted and added some comments in [brackets].

"...directly due to influx of new immigrants who came into the
country in record number, particularly from such places as
China and India [& Afghanistan, Saudi Arabia, Libya, Iraq...]"

"...and the change of our immigration policy, which is highly
damaging as it essentially stops the cash-rich immigrants
from landing here [as well as several very distinguished
bomb-toting international criminals...]"

Canada's immigration policy was absolutely absurd.

I'm glad to hear it is tightening up, but I'm also sure it's not half enough. The fact is Canada's irresponsible policy was so laughably ridiculous (and was mainly due to key Politicians there needing the immigrant vote to stay in office), that if our own intelligence / enforcement agencies (i.e., FBI, CIA, INS, ETC.) weren't even more irresponsible and laughably ridiculous, then Canada would have been the easiest, most logical and convenient way for terrorists to enter the US.

Instead, we re-stamp their Visas, put them on welfare to better afford our health care, and teach them to fly.

Real good "article" / email. Sound logic. I bet the good Dr. has absolutely nailed it.

What does IT stand for? International Trade?

Thanks for posting.


David C. Johnson</span>
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