Hopefully, I’m wrong…
If there is one thing we learned from the 2008 bad mortgage fiasco (that very nearly brought down the entire global economic system ((and if you know anything about economic history you know very nearly brought on years of dictatorships and authoritarian governments)), the thing we learned is that we learned absolutely nothing.
In an already softening Toronto condo market – a market that has sustained the entire Toronto economy over the past decade – and has been one the hottest condo markets in the world – into this soft market another 70,000 units are coming on line over the next year – into this bulging bubble Toronto City Council, in their final conflab-get-together before the October municipal elections, approved $21 billion in new construction projects – the majority of which are condo projects.
As one city councilor noted with dismay, Toronto council just approved another 750 floors of condo development.
So, as you can see, the Toronto condo market – sometime in the next 18 months – will implode. The bubble will burst. The real estate panic-button will be hit. The Toronto economy will go into the shitter, a-la-USA in 2008.
And we, Joe and June Average, will be expected to clean up the tsunami of an economic mess that will be left in the burst bubble’s wake.
For those of you who do not know, Toronto is the largest regional economy in Canada – and the 5th largest economy in North America (after New York, Chicago, Los Angeles, and Miami). The larger Canadian economy will stagger along after the bubble bursts but it will be a significant economic body blow to the country as well.
Toronto has some of the lowest condo building standards in North America, and we’ve got the 35 floor falling glass and ruptured water pipes to prove it.
That most of the condos are so poorly constructed – many are already falling apart before their new mortgages are even signed – is widely available knowledge. Entire street blocks have had to be closed due to falling glass. There are already a number of class action law suits working their way through the courts.
So you can add to the economic drama the fact that the condos are actually worthless (some architects giving them a 20 year shelf life). This will only compound the problem.
I mention all of this because today the Toronto newspapers noted that Toronto now has the largest percentage of poor people of any city in the country. 29% of children in Toronto now live in poverty. (If you didn’t know “living-in-poverty” is generally defined (though never officially – Canada has no “official” poverty level) as a family of four living off less than a full-time minimum wage job. The Canadian minimum wage is supposed to “lift” a person out of poverty – and as a full-time job that will currently give you just under $22,000 a year in income.)
Nearly 60% of Torontonians now work at, or close to, minimum wage (I saw at least a hundred minimum wage “help wanted” signs in restaurants and store windows on our recent visit to Toronto).
A more realistic Toronto poverty rate would be closer to 50% of the population.
Toronto is a Third World city in the making.
Should we be surprised at either the poverty rate or the condo bubble given our current political leaders? Neo-liberal conservatives ideologically driven by de-regulation, libertarianism, and law-and-order mentalities.
Brazilian-controlled Burger King is buying Tim Horton’s for $12B because of the tax breaks it will give Burger King in Canada. (Yes, that’s right: Canada is now a tax haven for Brazilian capital.) And the Finance Minister stood up in Parliament and proudly declared: “see, the system works”.
And Toronto Mayors and provincial Premiers for more than a generation have been giving developers hand-jobs with a free towelette. Some of the very best quality agricultural land in Canada has been plowed under in the Toronto suburbs – suburbs that now stretch nearly 50 miles in every direction. And the increased downtown density, while smart, came with no urban plan, no accompanying infrastructure, and virtually no code standards.
I doubt that a single urban planner has been listened to in the entire process.
Don’t be surprised when the local media acts shocked and dismayed when the bubble bursts and wonders aloud – as our proxy – “How did this happen? How could this happen!?” They will act as surprised as the rest of us.
The smart money – the American investment groups and overseas real estate investors – have already started to leave town. (The smart money always leaves a year or two before the damage is done – and the Economist noted that the smart money started leaving town last spring.)
As we drove in from Pearson Airport and weaved our way through the condo valley that is the Gardiner Expressway (feeling like I was again canoeing through the Barron Canyon in Algonquin), and after seeing over our two week stay the hundred cranes that are daily giving birth to new blades of glass – (some of which will reach 70 and 80 stories into the sky) – I thought “if you still think $700,000 is a good investment for a 600 square foot 5th floor condo beside the expressway, more power to you.
The road to madness is often paved with the best intentions.
(P.S. I watched you as you were watching TV – I saw you slumped on your sofa – as we drove by, not thirty feet from you balcony window.)
For more read: http://sustainablecitiescollective.com/donnellyb/330126/toronto-approves-755-storeys-new-development