In Toronto, there were strict zoning rules in much of the city, and “there just wasn’t any room for new single-family homes,” she said.
Condos were built in a frenzy.
They were considered great starter homes. But they were also limited in stock and where they could go, which put pressure on prices, Whitzman added.
Mathieu Laberge, chief economist and senior vice-president of housing insights at the Canada Mortgage and Housing Corp., said the boom was driven by speculative builders starting construction with only half, and sometimes less, of units sold.
Local mom and pop investors “jumped on the bandwagon” and bought up condos as a hedge against inflation, Fudge added, which was very high at the time. Sometimes whole families would encourage each other to buy units in the same buildings.
This coincided with credit cards becoming more popular, he said, and the conspicuous consumption the ’80s are famous for.
The hair was high, the shoulder pads were broad, and the spending was big.
A March 1987 story on the front page of the Star chronicled a “thunderous market, fuelled by low interest rates, high demand and insufficient supply,” with exhausted realtors, and discouraged buyers.
One agent quoted in the piece swore that prices weren’t out of line if you thought of Toronto as a “world class” city on par with Paris or New York.
In January 1989, columnist Gary Lautens bemoaned the fact his house made more money than him, despite not knowing “two words of French,” or having a high school diploma.
“It just sits there all day, not moving a shingle,” he wrote.
It was easy to think the champagne would keep flowing.
“Canadians have tended to have a belief that home prices are going to go up inevitably, kind of like a magic stock that will never fall,” added Whitzman.
“But it is like any other stock, what goes up must come down.”
The market shifts
Laberge sees the price drops that began in 1989 as a “condo problem” that spread into the wider market as fundamentals shifted.
“Super high inflation led to very sharp monetary tightening in Canada,” he said, with higher interest rates making borrowing more expensive.
The bank rate, the Bank of Canada’s key policy rate at the time, rose from an annual average of 8.40 per cent in 1987 to 13.04 in 1990, per Statistics Canada.
