Good News for GTA Real Estate

By Brian Madigan LL.B.

Overall there does not appear to be any difference in the markets over the week. Basically, the TSX is up 1%. If you were away on vacation and had no access to the news, you would say "no big deal".

So, we better look at the daily numbers

-515.55 Monday

-27.04 Tuesday

-349.30 Wednesday

+186.88 Thursday

+848.42 Friday

The markets worldwide exhibited a similar pattern, some more than others.

What changed? On Thursday there was a rumour than the US federal government would bailout the banking industry "bigtime", not just one bank here and there, but largely the entire industry. By Friday, came the confirmation. The rumour was true!

The gain on the TSX on Friday was the biggest gain 7.03% in one day, since the recovery following the stock market crash in October 1987.

The bailout will cost the government dearly. This will run in the range of something in excess of a trillion dollars. And, this follows the previous week's bailout of Fannie Mae and Freddie Mac at a cost of about one half trillion dollars. All in all, this financial crisis is costing a lot of money. In addition, there are large insurance companies including AIG which required funds. Within one month's time the US Treasury will have undertaken about $4 trillion dollars in additional expense.

The good news: it appears the the world financial crisis is over. The market has bottomed out, That now means no where but up from here, or at least that's the theory. The important matter is the the world knows the the US government will provide a stop-gap measure to bolster the market. The spillover effect will be the real estate market. It will take some time to work off excess supply in the US, but when we turn to the GTA:

1) there is no excess supply
2) there is no mortgage crisis
3) mortgage rates are attractive
4) financial institutions are well regulated and are financially strong
5) no bailouts are needed

As a result, we should experience growth from here. Present economic indicators would suggest that the GTA real estate market should be moving up from here not down.


Brian Madigan LL.B. Realtor
www.OntarioRealEstateSource.com