In 2013 Vogue declared Queen Street West one of the coolest shopping districts in the world. Known for its hip stores that were jam packed with trendy Torontonians buying the latest in fashion trends. Fast forward to 2017, and these stores are shuttering at a rapid pace. Fast rising real estate prices have diverted record amounts of capital from the city’s economy, forcing the closure of a number of the city’s trendy shops.
Real Estate Soars
Toronto real estate speculation has lead to an almost parabolic rise in home prices. The average price for a home in the city is now $770,745. This is a whopping 46% higher than it was when Vogue declared the city a bustling shopping centre. The Government of Canada hasn’t released official 2016 numbers for income in the city, but a look at past incomes show there’s little reason to believe it rose 46% during that time. So where is the difference coming from? The disposable income that fuels the economy.
Collection of empty storefronts on a kilometer on one of Toronto’s busiest streets. Photos: @ac_eco
Retail sales in Toronto have been on a steady slide according to Statistics Canada. December saw $7.824 billion in sales, a 0.83% decline from the year before when inflation adjusted using the Bank of Canada’s CPI calculation. That sucks, but it sucks even more when you realize that the Greater Toronto Area (GTA) is experiencing fairly robust population growth, adding an average of 68,996 people per year between the years 2011 and 2016. This means there are more people in Toronto, and they’re spending less at retail.
Canadian Consumer Debt
A primary reason for the reduction to retail spending might be due to the fact that Canadians are tapped out. Bank of Canada recently announced that Canadian consumers passed the $2 trillion debt level in December 2016. This represents a 5.2% accumulation of debt, with $1.436 trillion due to mortgages. In the third quarter of 2016, Statistics Canada estimated debt levels are now over 168% of disposable income – the highest it has ever been. There’s a pretty good chance people aren’t shopping because simply can’t afford to.
Dying retail spending is more than just the loss of a neighbourhood, it’s the first sign of a bubble being popped. The cash being diverted from the economy leads to a loss of jobs, loss of jobs leads to less income, which new buyers need to purchase homes. Less liquidity will lead to lower prices, and while potential first time buyers might think lower prices are great, it will be pretty tough to save a down payment with an unstable job market and less income.
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