Canadian Housing Market Bubble - June 2021
Thursday Jun 17th, 2021
[00:00:00] Mike: [00:00:00] Hello, we're back for another episode with the RA panel. We, as we cover hot topics happening in the real estate world in Ontario, I'm Mike, Chris for Metrotown a Royal page in the Holton Hills area. The panel, of course, is our regulars. I see Dav there with the sunshine Elise and m\Melody. And today we're going to tackle another hot topic.
[00:00:36] Cause that's what we do. What will the prices now everybody knows how high the prices have been in real estate and everybody's talking about it. But what now, what people are starting to talk about is are these prices going to slow down? We have been in a seller's market guys for a minimum of probably 15 months.
[00:00:55] So what's coming next. I mean, we know, we know what we know, and [00:01:00] that is the real estate market has been absolutely bunkered. Right. When you take a look at the multiple offers on deals when you take a look at the prices, I mean, you know, hundreds of thousands of dollars in some cases over asking, I mean, this is on precedent.
[00:01:16] And for those that own homes, you know, the level of these increases, of course, is increased you know, our equity in our homes, which is a great thing. But for those that want to buy a house, it's made it really, really challenging to do so. So, you know, what is the million-dollar question, guys?
[00:01:34] Well, I'll tell you what it is is part of the price is good, low down. And the panel today is going to tackle those questions. And, you know, I think the first question is for your melody. And that question is how has the impact of COVID impacted this housing? Boom.
[00:01:52] Melody: [00:01:52] That's a great question. Like, and so so I'm melody, I'm based in Toronto and I'm with forest sell real estate in your film in [00:02:00] Toronto.
[00:02:00] And so to answer your question, so how has the impact of COVID impacted the housing? Boom. So first let's take a look at some stats. So according to the IRCC, which stands for immigration, refugees, and citizenship, Canada, Between 2016 and 2019 Canada welcomes nearly 1 million new permanent residents. And between 2017 and 2018 net migration accounted for 80% of the country's population growth, that's incredible.
[00:02:29] And that increase likely helped fuel the housing demand. During the pandemic. And another note experts say that when mortgage rates dropped mid the economic crisis created by the health emergency housing became temporarily more available, more affordable, allowing more people to enter the market as well.
[00:02:49] And at the same time, we have all experienced or noticed that with government lockdowns and stay-at-home orders. This created a yearning for larger home space for those home offices, and [00:03:00] also wanted to have a backyard pushing home owners farther away from city cores and into smaller towns and rural areas.
[00:03:08] Therefore with all these factors combined and incredible growth in immigration and new residents in Canada, lower born costs, and the sudden need for more space is what triggered, what experts call a pull-forward of housing demand. In other words, many of Canada's prospective home buyers decided to pull the trigger on a purchase because of the conditions created by the pandemic back to you.
[00:03:30] Mike: [00:03:30] Great, great insights, melody. Great insights. Friday was a big day in Ontario in a number of pockets, right guys because some of these measures walked down and measures were used up as a show of hands, anybody on the patio yet? Yay. Fantastic one right now, as we continue to open back up for business dab this question over to you, what impact will that have potentially on [00:04:00] housing prices?
[00:04:01] Davor: [00:04:01] That's a great question. Devor here from Ottawa Weybridge Realty. So as the housing market appreciation during the pandemic has widely been dubbed unsustainable, many housing markets Watchers say that when the borders reopened new demand from immigration may keep the upward pressure on the prices.
[00:04:18] There are people out there who are assuming that there's going to be a home price, correction and prices have to fall because they've gotten so hot and that's certainly a possibility, but a housing bust. Isn't the only possible outcome. There is a very real possibility that home prices continue to rise.
[00:04:35] Particularly if the borders open and we're able to track international talent at the same rate as we have in the past. So while Canada's borders have been closed to most immigration since March 2020 to limit the spread of COVID-19, of course, the government has been increasingly increasing immigration targets in order to offset the agent population and boost the Canadian economy.
[00:04:56] So, what we could see is the repeat of [00:05:00] Vancouver for 15 years ago, where the influx of new immigration from China kept the upward pressure on the housing prices in spite of markets Watchers, talking of imminent correction. So in essence none of us know really well, we can only speculate. So if we knew we would all be hedge fund managers, not in real estate.
[00:05:17] So that's all I can
[00:05:19] Mike: [00:05:19] say. That's great to have really really good insight. And you know, I, I think that not all of us can remember Vancouver 15 years ago, but that's a that's a good takeaway. You know, for sure. So we did a session guys, a number of weeks ago on the mortgage stress test. And you know, I think is most Canadians are aware that they've changed the rules, you know, least given that's the fact what impact might that have.
[00:05:51] On on housing prices in the near future. Good
[00:05:54] Elyse: [00:05:54] question, Mike. My name is Elise Bouwmeester I'm with red and white Realty in the Waterloo region. [00:06:00] So we could see the housing market cooling off a little bit in the second half of 2021. Sales volume could be coming down from unsustainable levels, really, and possibly the price growth could slow down.
[00:06:12] There are already signs that the market may be taking a breather. The pace of home sales slowed down in April with the number of properties that changed hands fell by about 12.5% compared to the record high set in March. And this is all according to the Canadian real estate association, tougher mortgage rules will also likely pour some cold water over the sizzling hot market.
[00:06:36] But because of a shortage of housing supplies, we could also see elevated prices for some time to come. Just like divorce that we're seeing home prices continue to rise. And there are many, many factors that affect this, not just the mortgage rules. Some reports that came out last week centered on the situation facing first-time buyers under the new restrictions.
[00:06:56] Some people feel that the government could have devised a [00:07:00] narrower approach to prevent those buyers from being frozen out of the market. When a stress test came into effect, certain buyers were now pushed out of certain markets as they now qualified for less. So in the end, it's very hard to predict the housing market.
[00:07:15] We all know that. But everybody knows that mortgage rules definitely affected.
[00:07:21] Mike: [00:07:21] That's great. At least, I mean, and I know that we all have you know, clients that are first-time buyers and I feel for them, my heart bleeds for them at times. And you know, I think that what we have come to learn in this market is that what you expect isn't necessarily what's going to happen.
[00:07:37] So who knows, maybe we will see some, some drops, as you said, there's certainly a number of different experts that have different opinions. I hope this helps those of you out there looking at, at, entering into the market and what to do to stay close to it. Our objective as a panel is just to continue to get in front of you with hot topics.
[00:07:58] So we're not even announcing [00:08:00] those topics now because in some cases it's happening so quick. I mean, we're picking a topic on the fly. So with that, we look forward to getting back in front of you next week, and have a great week. Everybody take care.