Borat fans may have a field day with this but let's keep it serious...From The Star:
The gleaming 80-storey condominium tower that was to lead the revitalization of the Yonge-Bloor intersection in Toronto is teetering on the edge of extinction.
On Monday, the Toronto lender that advanced a $46 million loan is going to ask a court to put the Kazakhstan-backed project into receivership and sell off the now-vacant land its international developer boasts is the "best address in the world."
The lender, a consortium of Toronto businessmen, alleges in court documents that Kazakh developer Bazis International has defaulted on its land loan and the Kazakh bank backing the tower portion of the project is involved in a "massive financial scandal involving fake loans, racketeering and money laundering activities."
"The (land) loan has been in an almost constant state of default since December of 2008," said Toronto consortium leader Gary Berman, in a court affidavit supporting his group's bid to appoint receiver Ernst &Young.
Berman states in the affidavit that his group wants its loan repaid, or they are willing to purchase the property in a court-approved sale.
I'm not sure if this is the start of a real estate bust in Toronto, or whether it is simply an isolated case. One the one hand, the development seems to have collapsed due to the raketerring and money laundering scandal with the Kazakhstan bank (admittedly, it's possible that the government in Kazakhstan, which is closer to corrupt than anything, is just levying every accusation it could think of.) If it is solely a Kazakh bank problem then it may have nothing to with the nature of real estate in Toronto.
On the other hand, this is a prime location in Toronto. You are basically at the center of downtown, with the entertainment district a few streets away, shopping all around, the elite Yorkville nearby, and the financial district just a few subway stations away. The fact that they are having problems financing such a glamorous project implies that we may indeed be facing a real estate bust, at least in condominiums. The developer seems to have reduced the building from 80 floors to 67 floors—that alone indicates a softening market.
It's too early to draw conclusions but I'm bearish on condominiums in Toronto. I don't follow them and I can't afford them so this is just a wild guess. I have held that view for several years now and been wrong so far (actually prices started declining already I believe but it isn't a big correction per se.)
A lot of Canadians don't realize that the real estate market in Canada also rose quite a bit in the last decade and is vulnerable to a bust. We didn't have the subprime and Alt-A—liar loans and NINJA loans being the worst—problems like the US but Canadian debt levels seem similar to the US from some numbers I looked at an year ago. Detached homes may be fine in Toronto but I have a bad feeling about condos. There have been so many built in the last decade, with almost every single one out of reach for low-middle-class and working class—you literally have to be a professional with high salary or willing to leverage yourself. Although this Yonge-Bloor development is elite and on the high-end, you can get an idea by observing prices: $500,000 to $8 million per unit (places like New York and California have very high income so a place for $500,000 may be typical in California; but Toronto, like most of Canada, has much lower income levels so $500k in Toronto is quite a bit.) During the current meltdown, the high-income earners have been hit harder than usual—it's similar to the Great Depression—and I can see the market coming under severe pressure if people can't afford these condos.
From my limited impression, prices in Toronto haven't gone up that much compared to western Canada. I suspect places like Calgary and Vancouver (maybe after the Olympics) may see a greater decline than Toronto. Another thing is that, from an article I once read, although condo prices have not gone up much in Toronto, it is masking the fact that space/size has declined over the decade. Supposedly, developers are squeezing more units and the cost per square feet has risen. I have no idea if this is necessarily bearish. Condo buyers may not alter their pricing based on this change in area. Humans aren't rational at all times (For instance, using an unrelated example, many make decisions based on nominal prices even though real prices are what matter.)
(Incidentally, the Toronto International Film Festival is also moving to a new tower and, although that project has started, it remains to be seen if there are some negative surpises.)