Should You Be Afraid of Toronto Real Estate?
There’s trouble brewing in the Toronto real estate market, according to a pair of new studies. An Equifax Canada (Equifax Inc. (NYSE:EFX)) study reported there was a 52% increase in suspected fraudulent activity in mortgage applications since 2013.
On top of that, Canada Mortgage and Housing Corporation (CMHC) says there has been a recent spate of overpopulation and overvaluation in the Canadian real estate market, which occurs when housing prices outpace economic realities like income and population growth.
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“We’re certainly seeing more mortgage applications being flagged as suspicious by our reporting institutions,” said Tara Zecevic, vice-president of customer insight at Equifax Canada, in a press release. “While we cannot entirely attribute these increases to consumers overstating personal income or falsifying applications, we do want to remind people that there are serious consequences for making false or inaccurate claims on any loan or mortgage applications.” (Source: “‘There are serious consequences’: Suspected Canadian mortgage fraud spikes 52%,” BNN, January 11, 2017.)
The two most common issues flagged by investigators in the Equifax Canada report were “falsified account statements” and “falsified documents.”
Ontario, as one would expect, had the lion’s share of the problem, with two-thirds of all flagged applications coming from Ontario. That does not exactly bode well for the future of the Toronto real estate market.
CMHC raised its overall risk rating for the national housing market to strong last October, adding another layer of trouble to the Canada mortgage market. And, of course, as a by product, Toronto real estate. (Source: “CMHC Sees Strong Evidence Of ‘Problematic Conditions’ In 5 Housing Markets,” The Huffington Post, January 26, 2017.)
The CMHC warned that there is strong evidence of problematic conditions in Vancouver, Victoria, Saskatoon, Regina, and Hamilton, in addition to the country’s biggest city. The housing market assessment run by CMHC is meant to monitor Canadian real estate markets and serve as an issue warning system to alert Canadians to problem areas in the Canadian real estate market.
“Price acceleration in Vancouver, Victoria, Toronto and Hamilton indicates that home price growth may be driven by speculation as it is outpacing what economic fundamentals like migration, employment and income can support,” CMHC’s Chief Economist Bob Dugan said in a news release.
“For this reason, homebuyers should ensure that their purchases are aligned with their needs as well as the long-term market outlook.” (Source: Ibid.)
