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Supply and Demand Myth in the Housing Market ! Not factoring in Empty Home by Foreign investors

542 views · Published 5 January 2018 · 9:13 · Indexed 14 November 2026

Channel: Mike Martins · 2018 · News & Politics

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My Opinion: The concept of supply and demand is a basic economic principle that explains how the amount of a product or service available affects its price. In general, when there's a lot of something available and not many people want it, the price will go down. On the other hand, if there's not much of something available and a lot of people want it, the price will go up.

In the housing market, the supply of homes is influenced by things like the availability of land, the cost of materials and labor, and local regulations. The demand for homes is influenced by things like population growth, household income, and interest rates. In a healthy market, the supply of homes will match the demand for them and prices will stay relatively stable.

However, the relationship between supply and demand in the housing market can be more complicated due to the unique nature of housing. For example, demand for housing may not always be perfectly elastic, which means that an increase in price may not always lead to a corresponding decrease in demand. This could be because housing is seen as a necessity, or because people are able to borrow money to buy a home.

One factor that can disrupt the supply and demand balance in the housing market is the presence of foreign investors who buy homes but don't actually live in them. When these investors purchase homes in a particular market and leave them empty, it can lead to an excess supply of homes relative to the demand from local residents. This can cause home prices to go down, even if the underlying fundamentals of the housing market are healthy.

Sometimes, foreign investors can also create a false sense of demand in the housing market, leading to speculation and overvaluation of homes. This can contribute to the formation of a housing bubble, where home prices become artificially inflated and aren't supported by the underlying fundamentals of the market. When a housing bubble bursts, it can lead to a significant drop in home prices, which can have negative consequences for both homeowners and the overall economy.

To sum up, the supply and demand balance in the housing market can be affected by foreign investors who leave homes empty. This can create an excess supply of housing and contribute to the formation of a housing bubble, which can have negative consequences for both homeowners and the overall economy.

By Mike Martins

Article reads: Better Dwelling 
JANUARY 4, 2018
Toronto real estate is been plagued by a chronic shortage of supply… or is it? Recently we’ve been asked by a number of investors and developers whether they’ll be able to profitably create more supply in the Greater Toronto Area (GTA). That’s a tough question, and we’ll get to that on another day. In order to understand that problem, however, we need better estimates of how supply is born. So today we’ll be looking at a predictive model we’ve been working on, that estimates the amount of completions that will hit the market in 2018. At the current rate of construction, Greater Toronto will see over 57,000 new units completed in 2018.

About The Data
This isn’t meant to be a laser precise catalog of completions. It’s an estimate of how much new construction supply will hit Greater Toronto – and an estimate of when. We combined starts, under constructions, behavioral, and seasonal factors. We then apply it to our predictive new supply model. What we get is a rough idea of how many homes are going to be released into the region. This is the basis of supply and demand analysis, and not a lot of people have done it strangely.

Estimating completion times isn’t a perfect science, ask any developer (or pre-construction buyer). Weather, supply constraints, and even just plain municipal bureaucracy can hold up a project. We did the best that we could to estimate these times, based on how long these holdups have been. We even adjust for typical seasonal delays. It’s probably the most comprehensive predictive estimate most of you will ever see, but it’s not perfect. Some projects will get bumped by a few day (or months), and that happens. That said, on to the data.

Over 57,000 Units To Hit Greater Toronto In 2018
Expect a ton of new construction supply over the next year. By our estimates, over 57,674 units should register across Greater Toronto in 2018. To contrast previous years, that’s 59.9% higher than 2017’s completions. To give a long-term estimate, that’s 60.3% higher than the City of Toronto’s annual completion estimates for the GTA, from 2006 to 2015. It’s a lot of supply, but how has this supply contrast to the “growing” Greater Toronto region?


Remember, Census numbers don’t capture 100% of the population. However, it would need to be off by almost 20% for there to be a shortage in previous years. Either the Census is completely useless and we should just throw darts at a board, or we’ve been building with a pretty nice buffer to absorb household formation. I’m guessing it’s the latt

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