This was a comment I made in another thread why professional experience led me to think it was better for me to buy than rent in Toronto. Was surprised it was received so well. So thought I’d share it.
March 9, 2019 No comments Article
This was originally my response to someone who asked (once again) if s/he should buy or rent in Toronto.This link is her question and the thread, including redditor responses and my thoughts————————————————My response (based both on professional experience as a past senior immigrarion official and as someone who now owns a business and employs low-wage immigrant workers):When deciding whether or not to buy in Toronto vs. continuing to rent, it’s tough to say what is or isn’t the right answer. You have many things to balance. You need to evaluate everything with a long term view,Personally, I bought in 2016 in part because of long-term future population projections.The Ministry of Finance for the gov’t of Ontario makes fairly scientific and rigorous population predictions. They do so because despite the instant-media world we now live in, they have to make sound financial government investments and decisions which can support future projected populations. They’re not able to do so unless they come up with as objective as possible projections for future population changes. Unlike population forecasts by media pundits, the forecasts by the Ministry of Finance are not sensational for selling advertising space or for generating clicks. They are the best that we have in any given moment.Here is the gov’t of Ontario’s last population projection for TorontoThe Greater Toronto Area (GTA) is projected to be the fastest growing region of the province, with its population increasing by 2.8 million, or 40.8 per cent, to reach almost 9.7 million by 2041. The GTA’s share of provincial population is projected to rise from 48.3 per cent in 2017 to 52.3 per cent in 2041.Now for anecdotes:I used to be a high-level immigration official. I personally made decisions in over 50,000 immigration applications in immigration offices across 6 provinces, and in immigration visa section within 5 of our Canadian Embassies abroad for many years. I have personally witnessed and have been involved in not only the overall thought process of immigrants from around the world, but I’ve had a closer view than most of how they implement that thought process.In many countries in the world, a person doesn’t feel like they’ve “made it in life” unless they own. The reason isn’t as complicated as we think. Most countries don’t have the type of Social Services System that Canada does. Therefore, people elsewhere have a sense of urgency to become as self-sufficient as possible. Rental properties in other countries (unlike in Canada) are shit-holes, and landlords take advantage of people. This means that people have it imprinted in their minds from an early age that they must never fall prey to, or be at the mercy of a landlord. To do so is the equivalent of losing their self-sufficiency, and having nothing to fall back on in times of need.Therefore, when they immigrate here, they bring that notion of “I must find a way to buy something as fast as possible, and at all costs, even if it means never eating in a restaurant for 10 years, or having to only wear 3 shirts and 1 pair of pants”.When we think of the “immigrant-effect” on housing, we incorrectly think it all must be rich Chinese. No. That’s a small part of the overall picture (In Toronto it’s not nearly as huge as people think it is). Rather, a combination of upsizing (on the part of Canadians), of first-time Canadian buyers looking for fewer and fewer available properties, or those using R-E as an investment vehicle (on the part of Canadians, and on the part of some foreigners) to re-rent, and purchases from NORMAL (not rich) immigrants are all affecting Toronto’s R-E prices, and will continue to do so.It’s this last point that is interesting: The purchase of property by normal, but NOT rich immigrants.I now work in the private sector, but what I’ve seen in the private sector aligns very well with what I used to see as an immigration official.I had a 24 year old employee, almost fresh off the boat from South Asia, with no special education. He worked for me for minimum wage. He and his 23 year old wife (who immigrated with her family 5 years earlier, but who is unemployed) just had a child. They now have a family of 3 to support on his minimum wage. They rented in Jane and Finch for $1200 / month. But because their lower-middle class parents (on both sides), their siblings (on both sides), and even aunts and uncles (on both sides) could not culturally bear to witness a 24 year old father shamefully keep his family in rental accomodation, (and thus what they equated in their minds as falling behind in life by the minute), they all pooled their money together to give him $500,000 cash. Like holy fuck! They used it to buy a brand new condo. Their only expenses are now utilities and condo fees.And now guess what this newly housed young minimum-wage couple is doing? Every month, they’re also socking away money (even if it’s $100/month) to also be able to eventually contribute to the family pooling of funds to do the exact same thing for their siblings and/or future nieces/nephews.This happens all the time, and is never captured in the statistics which try to explain our strange housing trends. They’re not captured in the stats because neither a bank, nor the government (CHMC) will ever see them.Likewise, there are tons of intergenerational families (grandparents, parents, 2 or more adult children) who will also pool intergenerational funds together to purchase a house so all can live under the same roof. They may even all earn minimum wage. But they still manage to do this.In Canada, and in Canadian culture, we don’t do this, so it’s very very difficult for us to understand as a concept. And it’s even more difficult for us to understand its enormous long-term effect on real-estate, especially Toronto. Whole swaths of the city are purchased in this way.Back to the Ministry of Finance statistics…I spent years dealing with population growth statistics in a professional capacity (As a senior immigration official, I was in the business of building Canada, and these stats were key in the process). In Toronto, about 1/3 of the city’s growth comes from people elswhere in Ontario and Canada. But 2/3 comes from immigrants. More often than not, those immigrants have a “buy at all costs” mentality. If 2/3 of the 2.8 million new residents to Toronto (from now until 2041) are immigrants, and if statistics continue to show that our housing starts are not nearly enough to house those people, there will be a demand for housing like we have never seen in the history of Canada (It will be among one of the highest demands with one of the greatest shortages in North American history).We’re already starting to see the beginning of this trend. And prices (both for rentals and for purchases) are reflecting this.Now, there are a zillion other economic factors which can play with the housing market over the long term. You may find you want sell in the future when we’re going through a cyclical down. We may see an Armageddon-style world depression. We may see a Trump-style government get elected in Canada and scare the shit out of any immigrant who may want to move to Canada (never say never). We may see a war. We may see Toronto get so expensive that no business or low wage service workers can afford to operate and work here, leaving Toronto gutted of basic business services and as bad as Detroit. Or we may see the rest of the world develop to the point that staying at home in other provinces or in other countries is more attractive than moving to Toronto. Who knows.But all things being equal, if we don’t run into some sort of economic wall (with normal ups and downs that can be rode out over the long term), we’re likely going to see GTA property stay high over the long term (if not go even higher).And that’s why I bought, despite knowing there could be hiccups along the way.Just my 2 cents. :)———————————————————-TL/DR (Edit): Stats show us that housing start numbers are not (and likely will not) be enough to keep up with GTA growth. 2.8 million more people will move to the GTA by 2042, of which 2/3 will be immigrants, and past tendencies show immigrants, even not well to-do ones, overall find ways to buy versus rent, Unless there is a multi-decade catastrophic economic event against Canada or Toronto as a whole, this will likely only push housing prices higher. via /r/PersonalFinanceCanada https://ift.tt/2VLKFV9