Diane Francis at the Financial Post

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised.

Nearly three times’ more condo high-rises are being built in Toronto than are being built in New York City and nearly seven times’ more than in Chicago, according to Bloomberg News.

This development boom, and accompanying price increases, is not about housing to meet a sudden surge in population. It is not about an economic boom. If it was, Calgary and Edmonton would have 128 cranes, like Toronto does, building housing and pushing up all prices. Instead, this is taking place in Toronto and Vancouver where economies are moribund.

What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial and potentially dangerous real estate bubble. This mania happened in several other countries — where it was shut down — and has spread to Canada. Officials here have been urging restraint but that is not the solution. A ban on foreign buying of residences is the only solution.

This is what is happening. For example, a modest bungalow in Toronto sold last month for $1,180,800, $400,000 more than the asking price of $759,000. Canadian bidders were furious and deserved to be. The winning bid was made by a university student whose parents have a business in the United States but who live in China. I don’t know if there was a mortgage involved, but student housing — even for foreign students — is now liberally insured by CMHC, in other words, by the Canadian taxpayer.

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