In The News: Sunshine and Doom & Gloom

If I didn’t know better, I’d think the media is more concerned with selling newspapers and online ads than actually working to put forth accurate, timely, and objective news.

Wait…maybe I do know better.

On the very same day, one article from BNN talked about how Canada is a “safe haven” for real estate, while another article in the Globe & Mail detailed the CMHC’s concern about the Canadian housing market.

How can two articles be in such stark contrast to one another?


I guess it’s not all that surprising, after all, to see such conflicting media reports.

Perhaps it’s like sports prognosticators: one picks the Toronto Blue Jays to win the American League East division, and the other picks the New York Yankees.

So long as both prognosticators back up their predictions with some sort of fact, and so long as both predictions are absorbed by readers, then perhaps the goal is reached.

I’m not sure that objectivity is the ultimate goal of the media.

Fox News is commonly ridiculed for being complete propaganda, while CNN has been called left-leaning.

We know that the Toronto Star is more left-leaning than the Toronto Sun, although the latter is referred to as a “rag,” and the former isn’t as well-respected as the Globe & Mail.  Or maybe that’s not accurate.  Or maybe it is.  Or maybe it’s my opinion.  Or maybe it’s not.

But that’s the thing about “news;” it’s most often an editorial on a factual event.

So it’s not abnormal to open the newspaper and see an article making one assertion, and then see a completely opposite assertion in another media outlet.

Then again, we can probably pick apart the content of both of these articles if we want to.  Then which one tells the true tale?

The two stories I want to look at today:

1) “CMHC Warns Of Housing Slowdown”

2) “Canada as ‘New Switzerland’ Driving Toronto Condo Market.”

They tell very different tales about the health of the housing market.

The excerpt I want to look at from the first article:

After years of tolerating sky-high house prices, Canadian buyers are set to start flocking to more affordable homes and many others will opt to keep renting instead, helping to take more steam out of the housing market, the federal housing agency predicts.

New-home construction will slow over the next two years as low oil prices continue to take their toll on the economy despite rock-bottom interest rates, Canada Mortgage and Housing Agency said in a new housing-market forecast. Prices of resale homes will rise 3.4 per cent this year before slowing to 1.5 per cent next year.

….CMHC expects rising mortgage rates next year will put a damper on demand for detached homes. “As mortgage carrying costs continue to grow, particularly for single-family homes, demand will increasingly shift to more affordable housing,” said Ted Tsiakopoulos, CMHC’s regional economist for Ontario.

Cool – I love predictions!

Just like sports writers who predict the Toronto Blue Jays will win the World Series, those predictions are based on absolutely, positively, nothing.

The CMHC says, “prices of resale homes will rise 3.4% this year before slowing to 1.5% next year.”


According to who?  Oh, right.  According to you, the person or entity making the prediction.

What data do you have to back it up?  Well, the article doesn’t really say.  There’s the usual rhetoric about the affordability of real estate for families, the potential increase in demand for rentals, and the hot topic of the day – oil.

And then there’s this note about “detached homes,” which is one of the most commonly misused terms, and ideas, in the real estate market.

In Toronto, we don’t really differentiate between “detached” and “semi-detached,” since there are semi-detached houses in Cabbagetown, Summerhill, Playter Estates, etc., that sell for more than $2,000,000.

We do differentiate between condos and houses, but people make too much of this whole “detached” idea, as evidenced by this video from BNN:

“Detached Houses In Toronto Are Becoming A Scarce Commodity”

As for the Ontario-specific prediction:

Average resale price growth will slow to 3.6 per cent this year and 1.7 per cent next year, down from 7 per cent in 2014.

That’s a bold prediction!  From an increase of 7% last year, down to 3.6% this year, and 1.7% next year?

Well, at least they’re not predicting the 90% decrease that THIS woman is…

As for the second article from BNN, here’s a couple excerpts I wanted to focus on:

Canada’s reputation as a safe country to live and bank is luring buyers from abroad and driving the housing boom in Toronto.

The city of 2.8 million attracts about a quarter of the 250,000 immigrants who arrive in the nation each year. That’s helping drive demand for new housing, including condos and rental properties, property Developer Sam Mizrahi, said at the Bloomberg Economic Series Canada summit in Toronto, “Immigration keeps the market buoyant,” said Mizrahi, president of Mizrahi Developments. “Canada’s seen as the new Switzerland.”

Developers in Toronto are building 97 residential towers — some as high as 92 stories — more than any other city in North America including New York City, according to data compiled by Emporis GmbH. The developers, and the city’s chief planner expect condominium construction to continue as employees flock downtown for jobs, restaurants and entertainment.

Canada is seen as the new Switzerland, eh?

But wasn’t Switzerland a safe haven for money because the “Federal Act On Banks And Savings Banks” from 1934 which provided bank secrecy not available anywhere else in the world?

I’m not sure I see the comparison here.

Is Mr. Mizrahi saying that investing in poorly-built pre-construction condos in the downtown core and assuming the incredible risks associated with a crooked industry is tantamount to putting your money in a bank account where your government can never ask Swiss authorities to reveal your name?

Right.  I still don’t see the comparison.

Historically, in times of economic instability, people look to two financial instruments:

1) US Dollars
2) Gold

“The greenback” has always been a safe haven for investors around the world, although I wouldn’t call somebody who doesn’t want to lose money in an unstable economic, financial, and perhaps political climate, an “investor.”

But the US dollar is the most traded, most held, and most used currency around the world.

As for gold, look no further than “the gold standard” to see why it’s considered a safe haven in tough economic times.

So again, is Toronto a “safe haven” for investors?  Is it the “new Switzerland?”

And when this is said by a condominium developer, can we consider this in any way unbiased?

One more line:

U.S. developers “think it’s insane what’s going on in Toronto,” Wex said. “People do not realize how sophisticated and world-known our market is.”

It’s true.

A colleague of mine is an economic advisor, and now and again, I meet with his clients to discuss real estate.

His clients are always Americans, looking for “the big short” on Canadian real estate, specifically Toronto.

Of course, they have no idea how pre-construction condos are sold here in Toronto!  They’re completely unaware that a vacant parking lot becomes a sales centre, and people line up for the “privilege” to buy a future liability that they can’t get out of.

And when they hear that banks won’t finance these projects until they’re 80% sold, they soon realize why Toronto is what it is.

Then, they go back to New York, or Texas, or Los Angeles, and move on to different place to short the market, all the while, in disbelief about how Toronto real estate is pre-sold.

So, while I agree with some of the sentiments in this article, the idea of the Canadian real estate market being in any way comparable to a Swiss bank account is downright silly.


What did we learn from these two articles?

Well for starters, you can pick apart just about any newspaper article, television show, or media report.  You can do that to my blog – and people often do!

Secondly, we’re going to see conflicting reports about the Toronto (and Canadian) real estate market every single day, just as we have every day, for the past decade.

It all depends on the source.

Various newspapers have a defined readership, various columnists or writers have an agenda, and various news outlets have an angle.

And when you read any quote in an article, you have to look at who is saying it, ie. a condominium developer talking about how healthy the real estate market is, or a mutual fund manager talking about how the real estate market is about to tank.

In conclusion, please take everything I just said, and everything I write in every one of my blogs, and absorb it as fact.  🙂


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  1. natrx says:

    David, you need to learn to differentiate schill articles by special interests. CMCH while belonging in there, still has a higher level of awareness that they don’t need to get into specifics in a newspaper article. Or the article just left it out.

    And this is Canada as a whole. A weighted average.

  2. condodweller says:

    IMHO 🙂 Real estate is just like investing: it’s all about risk management. The problem is we are emotional beings driven by, at least when it comes to investing, fear and greed. Fear and greed makes most of us do the exact opposite of what we should be doing. When values are going up we fear missing out and greed drives us to buy, when values are going down fear tells us to sell to avoid further losses. A logical unemotional person would probably look at the situation and say gees inflation adjusted house prices in the GTA are at record high perhaps it may be prudent idea to sell five of my ten houses/condos that I have as an investment without making a call on when the market may or may not crash. Now, he may chose to put that money in the stock market which many consider over valued as well. There is no right answer as none of us can see the future but we can position ourselves using prudent risk management to minimize our downside.

    Now if your only real estate investment is your home then it’s a different story and it’s only difficult to mange if you bought recently but even then as long as you plan to live there the long term it should be ok.

    With regards to news articles being right or wrong, unfortunately those stories are designed to sell papers and sensationalism sells making most of what you read suspect.

  3. Mitch says:

    Just thought I’d share a great resource for all of the homeowners in the GTA reading this article. I encourage you all to join the free Facebook group GTA Homeowners to connect with other homeowners to share contractors, advice, ideas, etc related to owning/renting a home in Toronto and the GTA.

  4. crazyegg says:

    Hi All,

    Housing data (i.e. any statistic for that matter) can be made to look white or back depending on how the data is cut and/or presented.

    Save yourself the grief: Just “average out” the findings of the various real estate data that is in popular media and you will be good.

    Averaging out data is the safest play on reading any data in the media. Sort of like buying an ETF Index , you will be up in the end without doing any of the actual work. ;-))


  5. Paully says:

    If the Toronto Star had a hockey team, they wouldn’t have anyone who could play right wing!

  6. steve says:

    Nobody can see the future with absolute certainty, but people can look at current facts and the probability of something happening becomes apparent. Today, we have super low interest rates, a slack economy which produces few well paying jobs, a record number of people are precariously employed, and prices for shelter have never been higher. You don’t need a PhD in economics to see what today’s facts suggest about tomorrow.

    1. Kyle says:

      I think you’re confused between facts and opinion. Facts are not subjective, they just are what they are. All those items you’ve tried to used to support your thesis on the other hand are purely subjective (e.g. “super low”, “slack economy”, “few”, “precariously employed”), which is why they are actually opinions, not facts.

    2. Appraiser says:

      @ steve:

      One may require a PhD in clairvoyance to comprehend your post, it appears. If you have a thesis then state it, rather than coughing up some vacuous yet vaguely ominous pronouncement.

  7. Andrea Sammut says:

    I once read a quote that Economists exist to make Weathermen looks accurate!

  8. Joe Q. says:

    The comparison to Switzerland is a bit unusual, as most immigrants to Switzerland come from other European countries (particularly Germany, Italy and France) whereas most recent immigrants to Toronto come from Asia.

  9. jeff316 says:

    “His clients are always Americans, looking for “the big short” on Canadian real estate, specifically Toronto. Of course, they have no idea how pre-construction condos are sold here in Toronto! They’re completely unaware that a vacant parking lot becomes a sales centre, and people line up for the “privilege” to buy a future liability that they can’t get out of. And when they hear that banks won’t finance these projects until they’re 80% sold, they soon realize why Toronto is what it is. Then, they go back to New York, or Texas, or Los Angeles, and move on to different place to short the market, all the while, in disbelief about how Toronto real estate is pre-sold.”

    I’m a bit confused. Do they shake their heads and move on because the mandatory 80 percent pre-sold requirement for financing makes these this a longer-term venture that is difficult to short, or because the future liability makes shorting them too risky?

    1. @ Jeff316

      They move on because they no longer believe the Toronto market is going to drop.

      Based on the way buyers are buying, and the way developers are selling.

      1. jeff316 says:

        Oh ok, thanks. Brain = slow.

  10. Kyle says:

    When it comes to real estate, there are two main things that give a prognosticator credibility in my book, and what the prognosticator does for a living isn’t one of them. At the end of the day substance is king, i think it’s best to focus on the substance of the message, not the messenger.

    First – does the writer back up what they’re saying? Any idiot can make statements or pull predictions out of their bum – just look at Garth Turner, but very few can properly support those statements and predictions with actual facts, data and evidence. And in my opinion the following types of argument support are commonly used but do not in anyway count as facts, data or evidence: ad hominem attacks, conjecture, mined data, irrelevant examples or my all time favourite an incredulous tone.

    Second – what’s the writer’s track record? Again any idiot can pull statements and predictions out of their bum and then repeat those incorrect statements ad nauseum, but if they’re wrong far more often than they’re right, then you really need to ask yourself why you are listening to them, instead of say a magic eight ball, or a tossed coin?

    1. Appraiser says:

      @ Kyle: Well said. Your post puts me in mind of these two quotes:

      “I personally think honestly disclosing rather than hiding one’s subjective values makes for more honest and trustworthy journalism. But no journalism – from the most stylistically ‘objective’ to the most brazenly opinionated – has any real value unless it is grounded in facts, evidence, and verifiable data.”

      Glenn Greenwald

      “By giving us the opinions of the uneducated, journalism keeps us in touch with the ignorance of the community.”

      Oscar Wilde

    2. Joe Q. says:

      Kyle — I agree that actual facts, data and evidence are important, and that attacks ad hominem and hyperbole have no value. But what constitutes an “irrelevant example” is in the eye of the beholder. What seems utterly irrelevant to one observer may be a crucial piece of data to somebody else.

      For me, “what the prognosticator does for a living” does become important when reading reports or comments in the popular press (as opposed to detailed research with raw data, etc.) Substance is indeed king but when there is money to be made on one side or another, one wonders whether some substance of relevance is being omitted or minimized. “It is difficult to get a man to understand something, when his salary depends upon his not understanding it” (Upton Sinclair)

      1. Kyle says:

        I disagree with ascribing a bias, based on one’s job. So often i see people completely dismiss substantive, fully-supported rock solid arguments…which ultimately turn out to be bang on, because “so and so” works in real estate. This to me is A) completely illogical since it can be just as easily argued that someone who works in real estate should care more about their long term reputation and therefore be less biased and more transparent and B) completely disingenuous, because it is always pretty clear that the person is actually dismissing the argument because they don’t like the argument, but couldn’t come up with a substantive counter, so instead are simply using the person’s job as an easy out. A perfect example would be all those who dismiss Brad Lamb, because he is a Developer. This to me makes no sense, if he was just saying things to make you believe something that isn’t true, then why is he putting millions of his own dollars where his mouth is?

        That said, let’s continue following your line of reasoning for a bit. Lets say someone is actually trying to mislead for their own monetary gain. Eventually this would show up in their track record, which is my second point above.

        Additionally, i think everyone should focused on the substance but they should also actively question arguments (both those that they agree with and those that they disagree with). If you do that one does not wonder “whether some substance of relevance is being omitted or minimized.” one actively goes and verifies it.

      2. Kyle says:

        Basically to me an irrelevant example, is when someone tries to infer an outcome based on something where the underlying factors look nothing at all like what they’re trying to compare against.

        Some examples of the more common “irrelevant examples” would include comparing Toronto real estate prices to:
        – Tech stocks
        – US housing crash
        – Canadian Real Estate Market – Hint: there is no such thing!
        – Tullip mania
        – Toronto real estate crash in the late 1980’s
        – Stories of cab drivers and hair dressers investing in real estate – Hint: throughout history many blue collar immigrant families have amassed fortunes by accumulating wealth through real estate. So why is this a negative signal?

  11. AndrewB says:

    The key thing to look for in news is who’s interests are driving the news. News aren’t put out in completely objective packages. Some higher interest and bias is giving momentum to an article. Who has their interests in mind to say the market is a “safe haven”? Well, developers, investors, home owners, etc. Who’s predicting a crash? Well someone who has something to lose and that’s usually money.