Debt Servicing and the Role of the Toronto Real Estate in the Canadian Economic Rejuvenation was not involved in the creation of this content.

The state of real estate in Toronto has been in flux over the years. It enjoys some stability at some of the time, while it frantically tries to reach for balance on other times. At the wake of a global pandemic, far-reaching impacts coursed through the entire industry, defying predicted magnitudes and effects.

However, results show that the situation is far from the gloom and bleak outlook you might expect. There have been bright spots and positive changes, while a larger percentage of the market stayed neutral surprisingly.

It begs the question: how can we evaluate some of the key economic indicators? It is essential to look into sections such as the GDP-Business relationship, real estate market projections and price behaviours of homes based on location. The article below highlights the debt servicing ratios for individual citizens in the country, touching on the triggers, long-term and short-term implications.

Debt Servicing Numbers

In technical terms, the DSR (Debt Servicing Ratio) of a sector is the sum of debt outlays and interest payments being a portion of the sector’s overall private earning. Empirically speaking, DSR is the parameter for measuring financial stress due to debt.

According to a Condo Mapper study, household debt profile rose steadily since 1993. With the pandemic-induced economic downturn, the general prediction was that the ratio would soar higher.

However, the study uncovered some unusual debt behaviour. It sees DSR drop by 9.35% and a significant rise in per-household savings in 2020. It is a different direction from the YoY household debt increase before 2020.

The debt ratio dip explains that consumers and citizens have had to spend significantly less in the first and second quarter of the year due to the lockdown restrictions. Savings rose as a result, as non-essential services faced shutdown in the thick of the lockdown. On an aggregate level, economic lockdowns instigated a drop in money velocity.

Money Velocity

A key economic indicator is money velocity. It is how money gets exchanged within an economy. Money velocity is also a key variable in GDP calculations. Generally, the higher the money velocity of an area, the healthier its positive perception.

The pandemic stifled the rate of consumer spending across the industries and sectors and gained full expression in the GDP-money supply ratio.

But, are there ways out of a money-induced economic vortex? MMT (Modern Macroeconomic Theory) suggested that stimulation in spending helps improve economic outlook as lockdown eases. Government bodies can begin to hand out money, to encourage income. The crucial goal is to prevent acute impact on money velocity.

The Implications

Debt ratio would usually have short-term and long-term implications, and the government’s priority is to alleviate. However, the approach has to be general. For instance, authorities would mint some more money to encourage the citizen to spend more, but that is only suitable on a short-term.

On the long-term, more proactive measures are crucial. Money printing presents a new risk of hyperinflation. The main goal of the government during an economic restart is to prevent inflation.

A certain level of inflation can be healthy for a recovering economy, but the authorities cannot afford to utilise money injection as a long-term plan. Hyper-inflation steadily creeps in. The problem gets exacerbated. One possible long-term action is quantitative easing, but the government has to implement it to prevent excessive inflation carefully.

Qualitative Easing and the Role of Real Estate for Growth

The real estate industry commonly applies qualitative easing. It is because of the suitability and convenience as far as variables are concerned. The sector has the source of disposable income and borrowing costs (e.g. mortgages).

Quantitative easing specifies that when the borrowing costs reduce, the income supply increases and the demand for property spikes. In ideal terms, people expect to have more purchasing power once mortgage payments become more compact. It would mean that they can pursue more home acquisitions.

However, the scenario exists on the premise that the market demand is the only variable. In the long run, the motivation to buy property remains, and it begins to impact the national GDP positively.


The Toronto real estate has a real connection with the overall economic operations in the country. While it might not have been evident over the years, the industry proves to be absolute, providing some leeway in a financial crisis.

As shown above, the global pandemic presents a paradoxical effect, with some of its worst economic implications providing the most feasible solutions. One of the more negative impacts is the increased DSR across Canada, but it gets counteracted by the reduced spending it triggered.

The government can work around both scenarios, applying tactical short-term and long-term measures to steer the economy out of the lockdown-induced pothole steadily. Therefore, the Debt Servicing Ratio is one of the economic indicators that directly impact the country’s financial state during a global pandemic. was not involved in the creation of this content. Information contained on this page is provided by an independent third-party content provider. makes no warranties or representations in connection therewith.

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