Market Heating Up

Speculators are buying up residential real estate all around the Greater Toronto Area and possibly pushing house prices into bubble territory.

That conclusion doesn’t come from an international think tank or non-governmental organization but a brokerage at the epicentre of Toronto’s market in sizzling Leslieville.

Investors could be responsible for a chunk as large as 25 to 30 per cent of all sales in the GTA, according to the special report by Realosophy Realty Inc. The report is titled Freeholds on Fire: How Investors are Driving Up House Prices in the Greater Toronto Area.

The study was undertaken by Realosophy president and broker John Pasalis, who noticed a twist in market psychology. People began moving from the time-honoured principles of real estate investing – that the cash flow from renting out the property should cover the expenses – to the assumption that it was okay to lose money every month because bigger gains would come from the sale of the property later on.