Prices in Toronto have now started to fall.
UBS Global Real Estate Bubble Index 2018 has reported, “Since the waning of the housing frenzy in the middle of last year, prices have stabilized over the past four quarters. In inflation-adjusted terms, they are 50% higher than five years ago.
The report then goes on to say, “Last year’s ‘fair housing plan, which imposed taxes on foreign purchases and vacant apartments and implemented stricter rent controls, probably contributed to the cooling. Higher mortgage costs and tighter lending standards should limit the upside for the time being. But a short-term weakening of the Canadian dollar may again attract foreign buyers.”
Swiss bank UBS has indicated that Toronto has the third worst housing bubble worldwide, compared to New York that ranks 16th on the list. According to the Bank, “The term ‘bubble’ refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts.”
Why Are The Prices So High?
Supply & Demand
Toronto is a city that doesn’t have much more room to expand. Older areas are having to be redeveloped which is expensive and drives up costs for potential buyers. The demand stays high while the supply of housing becomes restricted.
Toronto attracts a lot of outside investment from people who buy properties expecting the prices to rise in the future. The ‘buy now sell later’ approach further limits supply and increases the costs.
Canada and particularly Toronto is seen as one of the best places in the world to live for quality of life. Many people have the notion they would like to move to Toronto, one of the most famous cities in the world. The increased immigration has increased the demand further and as a consequence, the prices.
How Do You Protect Yourself From A Bubble?
The housing bubble in Toronto unfortunately is just the tip of the iceberg. It’s not just a housing bubble, it’s actually and ‘everything’ bubble waiting to completely explode. This pin prick has started to let air out, but the bigger crash is just waiting to happen.
The central banks around the world have been printing enormous amounts of cheap money that has led to huge inflation. The governments have been borrowing colossal amounts of money, racking up large debts that are impossible to ever pay off. They have been using Quantitative Easing which is a term used to describe the vast money printing on a large scale. Everything seems more expensive to the average person, but actually it’s the value of your currency becoming less and less.
In the near future there will come a time, when interest rates rise and governments can no longer pay back the debt. The interest will be too high, then the governments and central banks will print more money to solve this… However it will make the problem worse, devaluing and possibly completely collapsing the currency. Look at Venezuela for the harsh reality that could happen to any country. Hyper-inflation is something that we should all fear and prepare for.
The best way to protect yourself is by decentralising and investing in Precious Metals such as Gold and Silver. This is a form of wealth insurance that protects your purchasing power over time. It maintains it’s value and has consistently risen in price the last 100 years. It is a fantastic way to preserve your wealth and protects you from inflation.
Silver is a hot topic at the moment due to the massive manipulation in the markets by banks such as JP Morgan. This bank has been driving the price of silver so low, whilst buying up millions of ounces of physical silver. It almost seems like they are preparing for something… Perhaps a huge financial crash?