REPORT: Irresponsible lending uncovered in Toronto condo market report

According to a report produced by equity research firm, Veritas and reported by Huffington Post Canada, serious questions are now raised about the possibility of irresponsible lending practices in the Toronto condo market.

In an effort to better understand the seemingly perpetual growth in condo prices, Veritas decided to send “mystery shoppers” to two unnamed condo project that are currently under construction.  Here are a few of item of interest from their experience:

  • BMO willing to lend half of the required 20% downpayment;
  • Sales representatives significantly stretching the truth on:
    • Local rental prices; and
    • Immigrant settlement numbers in Toronto.
  • Some investors have purchased units with borrowed money against their current home.
This report also underscores a need for better, all encompassing regulation and reporting on the pre-construction sales and assignments market in hopes of minimizing irresponsible sales and lending practices and speculation.

Although it would hardly fix the problem, but go a long way to minimizing risk, these issues underscore the need to use another real estate sales representative, not affiliated with the sales centre of a development project and knowledgeable in the condo and local rental market.  It is also important not to make impulsive purchases, but to weigh the risk versus rewards through sound knowledge of the marketplace and neighbourhood.

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