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Today, lets talk about the real estate market and try to understand what may be waiting for us ahead — and, more importantly, what should actually be done.

Let’s remember what the real estate situation looked like 10 years ago. The market would rise slightly, then cool down for a while. Still, prices continued to grow steadily by about 5% to 7% per year, and in some parts of the Greater Toronto Area, annual price growth reached as much as 10%. Back then, almost nobody was even thinking about cities such as Barrie, Innisfil, Bradford, or smaller towns. But recently, everything has changed dramatically. Partly because foreign buyers from China, India, Iran, and other countries began actively investing money into Canadian real estate, prices surged sharply upward. Homes became unaffordable for many Canadians. Demand for real estate rose dramatically. I would say this happened because there is not enough inventory — in other words, not enough homes for sale — while demand from Canadians and foreign buyers alike remains extremely strong. So let’s try to understand why there are not enough houses and condos. After all, we can see a great deal of construction across the Greater Toronto Area, and the northern part of the city is also full of new developments, both detached homes and condo buildings. The answer is actually very simple.

Factor number one is immigration. Over the past three years, Canada has accepted one million legal immigrants. About 50% of them settled in Ontario — that is, roughly 500,000 people. To accommodate such a number of people, around 170,000 housing units are needed, based on an average of three people per family.

Factor number two is investment. A large amount of money has flowed into real estate from foreign investors. They were not discouraged even by already high housing prices. Let’s look at it this way: today, a 400-square-foot studio apartment without parking in downtown Shanghai sells for about $500,000 U.S. dollars. A two-bedroom apartment costs around $1.4 to $1.5 million U.S. dollars. Today, the U.S. dollar is about 30% stronger than the Canadian dollar, meaning that a house Canadians buy for $1.2 million costs a foreign investor only about $900,000 U.S. dollars.

Factor number three is the low mortgage rate. Today, many banks are advertising very low interest rates for home purchases. Let’s take a rate of 2.3% to 2.4% as an example: the monthly payment would be around $400 for every $100,000 borrowed from the bank. Overall, this is quite affordable for many Canadians. If we remember the distant 1980s, when interest rates reached 18% per year, the difference is, of course, significant. But to be fair, housing prices back then were also much lower.

In my opinion, the Government of Canada and the banks missed the moment when prices began rising sharply and only belatedly started trying to cool down the overheated market. A great deal of negative information is now being pushed out by the media, banks, and financial experts.

So let us return to our rhetorical question: what should be done?

Here is my advice as a real estate agent with 10 years of experience:

For sellers: keep your finger on the pulse. Watch every change in the market and make decisions quickly. It is possible that we are now at the peak of prices, and by selling your home or investment property today, you may be able to secure the maximum return — rather than waiting another three to five years for prices to recover after a correction and begin rising again. The Vancouver housing market has already stopped growing.

For buyers: buying your first home today is more expensive than it was yesterday, but it is still better than helping your landlord pay their mortgage. Do you not have enough money for a down payment? Ask our team for help. I truly feel for families who are unable to buy their first and long-awaited home. Call us. There is no such thing as a hopeless situation.

Have you decided to sell your home? Have you decided to buy a home? Do not forget about our unprecedented offer: financial assistance when buying or selling real estate.

Биляк Владимир