Is Toronto Real Estate Market Recession-Proof?

Recession-proof? Is there such a thing? If there is, does the Toronto Real Estate Market fit into this category?

I’ve always wanted to write this Insight Article but previously, I thought it would be too bold of me, and that I may be permanently labelled as a super-bullish person after giving my opinion on the matter. However, as I had time to reflect while I was abroad, I told myself, “sure, why not? I should just give my 2 cents!”

I don’t believe in absolute certainty as anything can happen, but Toronto’s real estate market has a lot of upside going for it that makes it as close to recession-proof as possible (relative to other markets). If you missed last weeks’ Insight Article where I compared the cost of living to other major Asian cities I recently visited, you can read it here: CLICK HERE.

Recession-Proof Factors – With the comparisons out of the way and equipped with a newfound appreciation for the Toronto real estate market, I’m even more bullish than ever now. Allow me to explain. I’ve always monitored 3 factors when it comes to the stability of the Toronto real estate market – these factors are:

  1. Availability of credit (i.e., mortgage)
  2. Job creation

I’ve touched on 3) Job creation with Toronto turning into Maple Valley (a.k.a., Canada’s Silicon Valley), so I wanted to elaborate on the other 2 factors today.

Canada vs. The World – Population growth is also something that I’ve written about many times in the past. However, allow me to elaborate further. Canada gets a ridiculous amount of immigration in proportion to how many citizens we have. Furthermore, our new immigration selection process is much more rigid, wherein Canada allows immigration based on economic output – in other words, if you can pay more taxes in your profession or if you are bringing in lots of money to Canada.

Many people compare our immigration system to our neighbours down south, the United States, and simply dismiss how much immigration we have relatively speaking. However, you must compare apples to apples.

Size Matters – As per the chart above, the US has the most number of immigrants. However, if you look on the right-hand side of the chart that is highlighted in purple, one should realize that immigration ought to take into account the actual size of the country. Canada is at 21%, which is 5% higher than the US which is at 15.1%.

Another way to look at this metric is the number of immigrants in which a country gets per capita. You can see in the table below that for every 1,000 inhabitants, the forecast was for Canada to receive 6.6 new immigrants, compared to the US’s 2.9 new immigrants. Therefore, Canada’s immigration rate is more than double that of the US!

Also to further this point, most immigrants who come to Canada land in Ontario, and when they land in Ontario, where do you think they are most likely going to settle? If you guessed the Greater Toronto Area, you got it!

Show Me the Money – The second reason for Toronto being fairly recession-proof is the availability of credit. We all know that the stress test has made the ability to get a mortgage more difficult. Although that can be seen as a negative point, in some ways, it is a positive as well because we’re over-qualifying applicants in case of a recession. However, what I actually wanted to explain here is the delinquency rate or default rate.

Dangers of Default – In Canada, as per the graph below, we’re at a very low 0.24% default rate on mortgages, which means that there is only 1 mortgage default for every 4,166 mortgages. That’s a staggeringly low default rate!

Now, when you look at Ontario specifically, we’re actually 0.09% or other words, 1 mortgage default for every 11,111,111 mortgages. That’s even lower than the rate in all of Canada, that’s one in 11 thousand! It looks like Ontarionians want to keep their houses!

When compared with our US counterparts, their default rates are 27.22 times higher than Ontario (10.20 times higher than Canada) as their current default rate is sitting at 2.45% as per the chart below.

The reason why I bring this up, and why it’s important, is because if a recession were to be on the horizon and if the availability of credit is reduced, the default numbers show us that there is more emphasis in Ontario for citizens to keep their houses and mortgages during the rough times. The mortgages in Ontario and Canada are less likely to end in default. The mortgage defaults are what caused the US recession in 2008 (when the mortgages were not backed by any substantial collateral).

I also purposely mapped out the default rate during the 2008 recession for both countries. Canada wasn’t affected too much by the recession as the Toronto market was still fairly strong during that time. The default rate in Canada was only 0.33% at the time, and now we’re sitting at 0.24%, so the default rate wasn’t that much higher during the 2008 recession. In comparison, the US default rate was 7.96% during the 2008 recession – that’s in 1 in 12.5 mortgages that defaulted in the US during the time of the recession, compared to only 1 in 3030 in Canada. That’s some perspective for you!

Equity vs. Debt – Another important fact is that the average equity in a Canadian house is 74%, according to Purview. This means that the average Canadian already owns 74% of their house, while only 26% is mortgaged. There are 2 ways in which you can look at this metric, and both are good. 74% means that most Canadians bought their house a while ago and they own 74% of its current market value; in other words, their mortgage payments are low and as such, they are not as likely to default on their mortgage payments. Alternatively, it could also be interpreted as 74% of the mortgage loan has already been paid off. In either case, a metric of 74% points to stability and a lower likelihood of mortgage default. Given all of these compelling factors that push the Toronto real estate market forward, this is why I am so bullish on the market.

The Wrap – The world is chaotic right now; it’s like a storm. Toronto is right in the middle of that storm; the eye of the storm where it is the calmest. Everything around Toronto is chaos but when we look at Toronto, the real estate is nice, calm and steady. Does that make us recession-proof? There is a good chance, but only time will tell.

As long as you buy correctly and your properties cash flow positive, I don’t see why you would not benefit financially from the rising tide that is the Toronto real estate market. If this is something that you want to benefit from in 2020, please reach out to me at

Until Next Time, Happy Real Estate-ing

Leave a Reply