By Glenn McQueenie

Why does the mainstream media always get our industry wrong? I watch the news, read newspapers and stay up on current events. But now I am getting skeptical about any news I consume. Whenever anything is written about the Toronto real estate market, I just shake my head, and say, “How can they get it so wrong?”

With 27 1/2 years of helping great families find a property and now with two brokerages with more than 360 agents who happily help thousands of people buy or sell a home, here is my two cents.

The Toronto real estate market is being driven by these major factors.



The first is restricted supply. Eleven years ago, the Liberal government froze development on 1.4 million acres across 325 km of land from the Niagara River through Hamilton (Golden Horseshoe area), all across the north of the GTA and over to Lake Scugog and Rice Lake, under the Greenbelt Act 2005. This had the effect of creating the “GTA Island”, and like Manhattan in New York City, if you can’t afford to buy there, you will commute one to two hours to get to there.

The second factor is rapid population growth that increases demand.

The population of GTA and surrounding area has grown from 3.7 million people in 1986, to 5.5 million in 2005, to 6.3 million now. It will be 7.3 million people in 2021 and 9.1 million in 2036!

If you remember taking an economics course, you will recall a concept called supply and demand. If there is an increase in demand, there must either be a price or quantity adjustment. Right now, we have no capacity to increase the quantity of land available in the GTA and as a result, land prices have soared for building lots and condo development sites.

We also have record low interest rates. A $500,000 mortgage carries for $2,117/month at today’s interest rate. The same mortgage at 10 per cent interest is $4,472/month. A $1 million mortgage at today’s rates carries for $4,234/month.

The last time we had 10 per cent interest rates was 20 years ago and they have been falling ever since. In the last 20 years, there have only been two quarters when prices dropped in Toronto…see the correlation between prices and interest rates?

Another factor is increased “revenue tools” by the government. These are not revenue tools, they are flat out taxes and development fees. Let’s call them what they are. They can add an extra $100,000 to $200,000 to the price of a home.

Labour and material costs keep going up and will never come down.

Canada is seen as a safe haven for money, because we have a stable government, clear rules and we are governed by the rule of law and not by whim. There has been a huge influx of capital from China, Russia, Iran and host of other countries.

From mainland China, more than $1 trillion dollars has left that country in the past 12 months and I am told we have a few more years of this coming (plus their currency has gained a lot against the Canadian dollar).

What factors are not causing prices to go up? Real estate agents!

With the exception of some of the shady practices that we’ve heard about recently in Vancouver (those agents should be booted out of the business and never allowed to trade again), we do not cause prices to go up. We have a legal obligation to get the most money for the seller when we list their property. We explain that you can price it three ways:

1) At market value

2) Above market value – to leave room to negotiate

3) Below market value to get multiple offers.

We discuss the pros and cons of each approach and the seller decides. Guess what? Most of them decide to price it below the market in order to get more bids and sell for a high price. They look around their neighbourhood and see that the approach works!

Which is exactly what I would do in today’s market… because it works for sellers.

For our agents who work with buyers, it is an incredibly stressful market to be in, for both them and the buyer. We have entered into a crazy time with prices rising 16 per cent so far this year. One of our agents has presented 42 different offers for seven clients and has yet to get one accepted.

Can you see why buyers and agents get frustrated?

I hope people will think about this the next time they think about how easy it is in real estate. In fact, at every party I go to, people tell me they are changing careers and either going into real estate, personal training or dog walking. I hope they choose dog walking or poop-scooping, because they are very profitable businesses. We have too many agents, there is no need for more.

There is not one or two reasons why this market is going crazy. It is a multitude of factors and the last thing we need is for the governments to impose more fees and taxes or impose some silly regulations on the marketplace. It’s called an economic cycle, and what goes up above the historic mean, will eventually adjust back to the long term four per cent appreciation that real estate has had for centuries.

I have already seen people starting to cool off and not buy a home, because they simply can’t afford to move up to the home they want. If they just stay put the market will come back around to them.

Glenn McQueenie is CEO and founder of Keller Williams Referred Realty and Keller Williams Referred Urban Realty in Toronto. He was licensed as a full-time Realtor in 1989. Throughout his career, he has sold thousands of homes and built a business that is 98 per cent repeat and referral. He is the author of two books and coaches, teaches and mentors agents across North America.
  • Brennan

    Comparing the GTA to Manhattan is misleading. You would be able to fit Manhattan into the GTA many many times over. Manhattan is 59.1 square kms, while the GTA is 7,124 square kms.

  • Jacob

    TBH I don’t see how anyone has gotten anything wrong. All of those factors are ones discussed endlessly in the media, both at home and abroad.

    The only thing you have wrong is inserting your clear self interest and calling for the government to not intervene, despite the fact that our debt to income ratio is the highest of the G7 countries and higher than it was in the US in 2008 – this is not part of a normal economic cycle and you’re being irresponsible.

    • Glenn McQueenie

      Jacob, This article was written before B.C imposed the 15% tax on Foreign Buyers, and was connected to the previous comment about governments imposing rules, fees or silly legislation.
      Here are the unintended consequences of what happens when the Governments intervene…(ironically, 9 months before the provincial election in BC, what are the odds?) I have a friend who sold his house to a Canadian resident in B.C, That Buyer sold their back-up house to another Canadian, who sold their back-up to another to another Canadian, for a chain of 12 people( of which 11 were either permanent or Resident Canadian status). The problem was that the first buyer on the chain was an Asian( non-resident) who bought a condo for $$600,000, and now can’t afford the $90,000 tax to close. All of the sales were done before the tax was imposed, but closed after the announcement. As a result, none of these people were able to move due to the crazy way that the government introduced retroactive taxation.

      If you think the government is always the solution to the marketplace, you may have a problem. And if you want to talk about self-interest, just watch politicians jump on any bandwagon of crisis, to impose more fees, levies,taxes and control on the marketplace.
      Your comment about debt-to income ratio being higher than in the U.S in 2008 is disingenuous. If you knew anything about the U.S mortgage market, you would understand it is not even comparable to Canada. You actually have to qualify in Canada, and have a down-payment, proof of income, and some type of employment. They also deduct mortgage interest against their income, so there is an incentive to keep a high mortgage.( and the gain is not tax free)
      The real cause of the increase in debt-to-income ratio is the following;
      1) High taxation leaving fewer dollars in the hands of the public
      2) Record low interest rates and relaxed lending criteria
      3) The wealth affect of increasing Real Estate prices
      4) ridiculous credit card interest rates
      5) lack of real wage growth

      I will not comment on me being irresponsible, that is just silly.
      Glenn

      • Jacob

        >Jacob, This article was written before B.C imposed the 15% tax on Foreign Buyers….

        Then why is the article dated August 10th 2016. Either you’re not updating your article when significant things happened in the marketplace in between writing and publishing, or you’re trying to add in facts after the fact to alter your narrative – either way, poor practice.

        >Here are the unintended consequences of what happens when the Governments intervene…I have a friend…

        Stop right there. Anecdotal stories don’t hold much weight. If you’re merely demonstrating that this is a case in point then provide statistics as to the pervasiveness of the problem, otherwise “see what happened to a friend of mine” doesn’t even pass muster for a high school paper.

        >If you think the government is always the solution to the marketplace, you may have a problem

        Straw man, I said no such thing – but they do play a roll in the marketplace. Also, you seem to want to above responding to anything personal (such as me saying you’re being irresponsible with what you’re publishing), while making personal jabs yourself.

        >The real cause of the debt to income ratio is the following…
        Stellar pivoting! Calling the “Wealth affect of increasing houseprices” a factor while at the same time not admitting this is a serious issue facing the economy

        The original “article” was shoddy click-bait, but understandable – but the “article” combined with your response… c’mon man. Maybe you’re good at real state – stick to it.

  • Astoria

    I hope it crashes soon!

  • TimeToWatch

    I agree with all points, except that if Buyers stay put the market will “come back around to them”. That’s impossible to predict. It’s just as probable that it won’t, and we’ve now set a new benchmark that will continue to rise. It’s a roll of the dice. I’d rather get in now than wait it out. But what do I know? I’m a talking owl.

  • Keven Reimer

    I agree with the assessment – I wonder if some of the news reports are an attempts to use media and social media in a vain attempt to curb consumer interest,

  • Icanspell

    The tulip bubble was a simple supply and demand issue as well. Not enough tulips and too much demand for them.

    Pretty easy to rationalize reasons for why the market is overheated if you ignore market psychology. The tech stock bubble made a whole bunch of sense, of course only until it burst and we realized how crazy we had been. Toronto’s 1980s real estate bubble was apparently about supply and demand as well – until suddenly it wasn’t.

    Oh and you cite GTAs population growth as a factor in rising prices. What about the early 1990s – when the city’s population grew by 1/3 and prices continues to fall by 40% during that time?

  • Dawna

    Accurate and informative, at least in my opinion.

  • Sean

    Well written. Good solid article. Like it or not these are the primary reasons.

  • colea

    I like it when people say that this is the demand driven market, population increases so the demand increases while the supply remains low. How can you get it so wrong, to cite the author. Because you see, real estate is not purchased with people, but with MONEY! So if we have 1 million more people with no money (and vast majority of people who come here have no money, that’s why they came, I was the same), prices will not increase because they are not in the market. So that explanation is obviously an oversimplification. The main factors are subprime mortgages, speculative demand. If there are so much more people, why no more rental properties are being built? Surely the demand for those would increase as well? I only know one such development.

    • Chad McBain

      Can’t speak for your area but where I live rental properties are being built fairly rapidly for the first time in more then a decade so it is definitely a supply problem however locales may vary I do understand. Secondly we don’t have true subprime mortgages in Canada. While you can put as low as 5% down on homes under $500,000 you still in most cases have to qualify at the prime rate.

      • Jacob
      • Alan M.

        Chad,

        I believe that you are correct with the following: “we don’t have true subprime mortgages in Canada.” — with particular notice taken of your qualifying use of the word: “true”.

        As I recall, the American subprime product offered a low interest rate on the front end as an slippery inducement that was structured to jump by about 4%, not much later on. It is said that the American paper moved around so much that it was hard to tell, in the end, who even underwrote some of these mortgages initially.

        Benjamin Tal’s (CIBC’s Deputy Chief Economist) following statement, in the Financial Post, helps to clarify what a subprime mortgage can mean in Canada: “But remember subprime can be someone like a plumber,” he said, referring to self-employed workers, a segment of the market that Canada Mortgage and Housing Corp. has mostly abandoned when it comes to backing loans.”

        CMHC even addressed the American subprime mortgage fiasco at one of their Outlook Conferences. While in Canada a subprime mortgage may be underwritten to someone who is self employed, the American subprime product only required a heartbeat — meaning someone could be unemployed. As a matter of fact, I don’t even believe that the “heartbeat” requirement was cast in stone — on the contrary, some names were taken from stones (gravestones)! Perhaps, in order to draw a clear distinction from the American subprime mortgage product said product should have been described as: subterranean mortgages.

        In any event, what constitutes a “subprime mortgage”, North verses South, is clearly somewhat subjective. However, I don’t believe that the word “fiasco” has ever been used to describe the Canadian subprime mortgage market.

    • Landi E

      Canada filters migrants by potential to be an asset to the country. I have lots of family oversees who can’t come here because they don’t have 20,000+ to bring with them

  • Chad McBain

    Excellent Glen, I have blogged about this and tell all who ask…which is most people lol. I am amazed at how few in our industry even know or realize this and instead help propagate the misinformation. Bob Rennie and his group have been saying similar things for years out in Vancouver. Few want to hear it though….it isn’t going to change anytime soon so consumers and Realtors better accept it. Buy what you can comfortably afford now…it will cost a lot more later!

  • Marty Douglas

    Great article Glenn. If you substituted Greater Vancouver for Toronto, you’d be writing about our market in BC. The media has never been so swayed by the squeaky wheel of a few bad apples ( by the way, your bad apples just haven’t been caught yet!) combined with the whining of people who could never afford the home they complain foreigners are buying. If our provincial election weren’t next May, the market place probably would have been left alone.

    • Alan M.

      Marty D,

      I think it was actually the B.C. Premier who was swayed more so than the media, Marty.

      A bad apple will probably be swayed by a breeze and hit the ground faster, but the kind of “bad apple” in question who is practising as REALTOR in B.C.,
      didn’t seem to be concerned if they would even hit the ground — let alone how hard they might hit, and that’s the problem Marty that seems to be above your level of reasoning.

      Marty, I don’t think people have a tendency to do much whining about the homes they can’t afford. However Marty, you do seem to be a little disgruntled about the recent events in B.C., concerning the subject of Regulation. Maybe the subject isn’t above your level of reason and you’re just whining!