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:
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:
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
“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.”
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. 🙂