In March of 2021, president and chief executive of Canada Mortgage and Housing Corporation Evan Siddall tweeted that the federal agency had erred when it forecast the economic collapse due to the pandemic might cause home prices to plunge by as much as 18 percent.
Of course, as we all now know, the opposite occurred with prices skyrocketing. In Vancouver, West Vancouver, Richmond, and Whistler, the benchmark price of a detached home is over $2 million. It’s more than $1.8 million in Port Moody, North Vancouver, and most of Burnaby. As of December 2021 in the Greater Toronto Area, the average selling price was up 24.2 percent over the previous year to $1,157,849.
While you might want to put your house on the market among the homes for sale in Toronto or almost any other city in Canada, there may be some trepidation as buying a new one is proving to be a lot more challenging. There are multiple factors behind this sizzling hot housing market, including these.
An increase in buying investment properties
According to mortgage data, there has been increased activity among two groups of multi-property owners. Some are borrowers with two or three active mortgages, with most likely those who have a primary residence and at least one vacation home. Others that have four or more mortgages are typically real estate investors and they’ve been an increasing part of the equation, accounting for 15 percent of homeowners in the second quarter of 2021 as compared to the same period two years prior.
The sudden influx of investors is playing a big part in fueling the rapid home price growth, with many Canadians purchasing homes as investment properties. Foreign investors have been doing the same. Canada’s minister of housing Ahmed Hussen believes municipalities should temporarily ban foreign purchases to help ease the affordable housing crunch residents are facing.
High income earners
Another factor is high income-earners as the pandemic didn’t have as much of a negative impact on them as compared to others. In Toronto, Vancouver, Montreal, and Ottawa, home price increases were most pronounced among higher-end homes. Many of the people who own them haven’t suffered much from unemployment as they tend to have jobs that can be done remotely.
Higher earners were able to save more not just because they’re bringing in more income, but due to the restrictions on shopping and travel, they spent less. When combined with the low mortgage rates, homes became the perfect target for spending their money.
Making up for the shutdown
Another reason for the surge in housing demand is due to the period that the market practically shut down during the early part of the pandemic. Those who planned to buy, put off their purchases, unleashing the demand later. Ultimately, buyers outnumbered sellers in many places throughout the country, making it ideal for home sellers.
Housing supply and demand
The low inventory of homes and high demand results in a hot housing market, which is the case throughout Canada, the U.S., and beyond. An interruption in building materials and construction means not enough homes are on the market for newcomers to buy.
The federal government can help correct this problem by providing more funding to build affordable housing and make it easier for the private sector to access public land for building. But it’s not a quick or easy thing to do, which means it won’t have an immediate impact.