Nearly three times more condo high-rises are being built in Toronto than are being built in New York City and nearly seven times more than in Chicago, according to Bloomberg News.

This development boom, and accompanying price increase, is not about housing to meet a sudden surge in population. It is not about an economic boom. If it was, Calgary and Edmonton would have 128 cranes, like Toronto does, building housing and pushing up all prices. Instead, this is taking place in Toronto and Vancouver where economies are moribund.

Conventional wisdom is that this is the market at work. This is not the market at work. This is manipulation of a government system of open-ended mortgage insurance that is poorly supervised. What is going on here is a deluge of hot money from abroad that is creating an artificial, and potentially dangerous real estate bubble. This mania happened in several other countries -- where it was shut down -- and has spread to Canada. Officials here have been urging restraint, but that is not the solution. A ban on foreign buying of residences is the only solution.

This is what is happening. For example, a modest bungalow in Toronto sold last month for $1,180,800, or $400,000 more than the asking price of $759,000. Canadian bidders were furious and deserved to be. The winning bid was made by a university student whose parents have a business in the US but who live in China. I don't know if there was a mortgage involved, but student housing -- even for foreign students -- is now liberally insured by CMHC or, in other words, the Canadian taxpayer. This artificially corrupts the housing sector, presents a great risk to taxpayers in the future, and inflates housing in the afflicted areas to unaffordable, unnecessary levels for Canadian buyers.

Such a transaction would be illegal in Australia, or China, Thailand, or Switzerland. Australia was a victim of a similar frenzy until 2010 when a ban was imposed. Here are the Aussie restrictions, itemized in a policy, issued by the Treasurer of Australia, that Canada should adopt immediately:

-- Any temporary resident of Australia -- person with a work permit -- can buy a new or used unit but cannot rent any of it out to others and must sell when their residency ends. Temporary residents are banned from buying any investment properties.

-- Non-resident foreigners are banned from buying homes or investment properties. The only exception is if a foreign entity doing business in Australia wants to buy housing for its Australian staff.

The hot money has also been kicked out of China, Hong Kong, and Thailand where it swarmed around the condo market, pushing prices to unacceptable levels. Then it hit Vancouver, and most recently Toronto with a vengeance, and is also beginning to nibble away in Calgary. Entire buildings are being marketed to foreigners from Asia, the Middle East, and Latin America. Some groups are buying 50 to 100 units at a time.

But the latest loophole, offered by Canadian taxpayers without their permission, involves student housing that is being encouraged by CMHC. In 2010, the CMHC changed its rules to insure mortgages on residential properties that will be used for student housing, foreign or domestic. For only 15 per cent down, a unit bought near a university, or hundreds of them at a time, and rented to students will be insured by taxpayers.

The dangers signs are everywhere. Figures show that Canada's vulnerability to mortgage defaults has soared beyond American levels at the time of the sub-prime frenzy. In December, the International Monetary Fund warned Ottawa and urged it to review CMHC's governance and oversight, and assess whether the agency needs to do more to protect itself against housing market risks.

Finance Minister Jim Flaherty, who has acted to try to cool the market three times since 2008, has cautioned families to be careful about taking on debts they won't be able to afford when interest rates rise. But this is not about the market or about Canadians, but about unacceptable foreign buying pressure.

In China and Hong Kong, foreigners are banned and locals restricted to one mortgaged unit and a second one only if they pay cash for it. The Swiss have a quota for foreign purchases and allow one unit as a second residence for their exclusive use. European countries often charge foreigners twice the property taxes they charge locals. In Thailand, foreigners cannot buy land but they can buy condos, but only up to 49% per building. The United States does not restrict foreign housing, but keeps track and mortgages are difficult to get.

Canada's Office of the Superintendent of Financial Institutions (OSFI) itemized the dangers in a report obtained recently by Bloomberg News through an Access to Information request. The OSFI documents said foreign buyers were pushing up housing costs and lenders were becoming "increasingly liberal" with mortgages that don't require borrowers to verify income.

This will result in a catastrophe. If Canada does not stop foreign buying, or temporary resident buying, Canadian taxpayers and homeowners will pay an enormous, and potentially disastrous, price.

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