We’ve seen many reports about the rebounding real estate market in Canada, including ones on here, Realty Kitchen. But today, yet another report has appeared, suggesting that the Canadian market is in bubble territory. Or, at least, several markets in Canada are in bubble territory.
Image: Jay Woodworth / Flickr
While most cities that dropped in price in late 2008 and early 2009 have begun to rebound, the report suggests that three of them – Vancouver, Toronto and Victoria – have rebounded further and higher than is perhaps indicated by the market fundamentals. These three markets have seen price increases in the high double-digit range, while other markets, such as Montreal, have risen less than 10% since last year.
The experts argue that this suggests that while Montreal is recovering well and at a sustainable pace, Toronto and Vancouver’s sharp increases suggest these markets are volatile and subject to another dive in prices.
Although it may be true that Toronto and Vancouver are in store for a sharp correction, this prediction doesn’t seem to be based on the facts. For starters, the common factor connecting Vancouver and Toronto is that they are in provinces that will be adding a HST by June 2010. The extra buying that this deadline is encouraging are surely causing some price rises.
And the prediction ignores the relative urbanization of the markets in comparison to the rest of Canada. For instance, in Montreal, the average two-storey house costs $355,109 in 2010. In Toronto, a similar home would cost $562,150 and in Vancouver it is nearly a million dollars. This is where the growth is – price growth was driven by two-storey homes.
But in Vancouver and Toronto, increasing urbanization and a lack of new two-storey housing stock is essentially pushing this form of housing out of the hands of the middle class. As a result, condos are replacing two-storey homes as the homes of the middle class, and this is reflected in their much cheaper prices: $317,579 in Toronto and $470,000 in Vancouver. These housing units grew more slowly in price, suggesting a slower rate of sales. Many new condos are also coming on line in these markets, which should further help ease the price increases.
Once again, it’s in the best interests of many people to exacerbate fears about housing bubble: it encourages people to make rash choices. Try not to get sucked in, and make the right decision about your real estate based upon your own needs and not what other people are saying you should do.
Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com
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