Greater Toronto households are starting to show a few cracks, after a big debt binge. Office of the Superintendent of Bankruptcy Canada (OSB) filings show insolvencies jumped in Q3 2019. The Greater Toronto region isn’t just showing a large climb for insolvencies. It’s been accelerating recently as well.
Insolvencies Vs. Bankruptcies
Insolvencies come in two flavors – consumer proposals and bankruptcy. Both require a licensed insolvency trustee (LIT) to make your filings. In a consumer proposal, the borrower pays a percentage of their debt, in exchange for discharging the balance. In bankruptcy, the borrower assigns most of their assets to a LIT, and they negotiate the elimination of most of their unsecured debt. All bankruptcies are insolvencies, but not all insolvencies are bankruptcies. That said, both imply lender losses, and a pretty big mark on the borrower’s credit.
Greater Toronto Insolvencies Rise Over 26% In Q3
Greater Toronto insolvencies are up big time in the most recent quarter. The region saw 4,626 insolvency filings in Q3 2019, up 26.67% from the same quarter last year. To contrast, Ontario had 11,517 insolvency filings in Q3 2019, up 22.43% from last year. Both regions are growing fast, but filings in the city are growing a little faster than the rest of the province.
Greater Toronto Insolvency Filings
The number of insolvency filings made in the 12 months ending Q3 2019, for both Greater Toronto and Ontario.
Source: OSB, Better Dwelling.
Greater Toronto Insolvencies Are Up 17% Over The Past Year
Greater Toronto’s insolvency numbers have been accelerating for the past year. There were 17,092 insolvencies filed in the 12 months ending in Q3 2019, up 17.28% compared to a year before. To contrast, there were 43,244 insolvencies across Ontario over the same period, up 13.43% from a year before. Once again, this shows Greater Toronto is over represented for growth in the province.
Greater Toronto Insolvency Growth
The percent change for insolvency filings made in the 12 months ending Q3 2019, compared to a year before.
Source: OSB, Better Dwelling.
Greater Toronto is seeing insolvency growth run higher than the rest of the province. The most recent quarter also came in higher than the average growth rate over the past 12-months. This means the trend has been accelerating recently. Rising insolvencies are a general trend in Canada, as insolvencies approach Great Recession level highs. The Big Six banks also confirm this trend, as recent filings show they’re setting aside higher levels of loan loss provisions.
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Shocking. Shocked. It’s almost like rents can’t surge 20% in a year, without everyone going broke.
Not just renters. Condo “investors” are paying about $1000/month to carry new released condos and subsidize tenants, while condo prices rise $500-1000/month.
I don’t think I’ve seen anything like this in Toronto, for a very long time. Even in the early 90s, people weren’t negative cap to get in.
?? Downtown Toronto condos are $1000 psf (pre construction higher, but you cannot rent those yet).
800 sq ft = $800,000
Interest Cost per Month (not Mortgage, because that is a return of your investment)
2.5% assume you 100% finance != $20,000 / 12 = $1,667 a month
Condo Fees ( at 75c a sqft ) = $600
Property Taxes $6000 = $500
Insurance (minor) = $100
Total Cash = $2867
2 Bedroom Condo downtown rents are $3000+
Now for people paying $1200-$1700 psf for pre-construction condos, you better hope that rents go up, and mortgage rates stay low or go lower.
I would check your math. You don’t seem to be compounding and it looks like you’re amortizing over 40 years. And we know 100% financing is not a thing. But I will pay in unicorn farts so what do I care.
Depreciation is an expense.
“You must unlearn what you have learned.” – Yoda
Banks are getting slaughtered on loan loss provisions.
Exact opposite trend as in the US from what I’m seeing.m
Not exactly. Big liquidity issues are being supported by “not QE” version of QE.
If you look at the graph Brampton is 26+. My understanding is that Brampton is mostly Indian from India. Probably have dual citizenship. When until these people leave the country without paying the bank back. Yeah the bank can sell the house, but what happen if a bunch of them leave at the same time and it driver the prices of house lower. Immigration can act as leverage when people are coming in but it can act the order once people leave without paying their debt back.. Will see how good Canada economical strategy (mass migration, housing inflation, debt inflation)will work out.
Hmmmmm….Milton is very high considering the population….Highest in the west end…