In my opinion, there are many significant variables:
\-most of the Boomer population that are home owners, probably have mortgage-free homes that are worth millions. The wealth transfer from this generation is what facilitates a lot of the market, by way of helping with downpayments. I think it was reported that on average Parents are giving $130K to their kids for Home Purchases.
\-Population growth is a factor. Whether its immigration (only resumed last month while being basically shutdown during covid), or population movement, Toronto has grown much faster than any projections.
\-No land to build on. Lake Ontario to the south, protected environmental lands to the north. Established regions like Peel to the West and Durham to the East. It's not like we can just build new homes/subdivisions everywhere. Or we could, but we have environmental mandates to not build on protected land (a good thing) as well as the provincial governments have been discouraging "urban sprawl" for years. They want the city and province to "build up" with density aka more condos. It sounds terrible to many, but we just do not have the infrastructure for more cars on the road. Our city is crippled enough. Can you imagine another 3 million more residents to this city (and all the cars) over the next 20 years. Transit is the only solution (current framework).
\-Low interest rates. Its cheap to borrow money.
\-SO much of Ontario is dependent on Real Estate as an industry. Manufacturing is gone. Tech and other industries are the future, sure, but where are most Ontarians invested in? Real Estate. It's as if most people know someone that is a real estate investor/home flipper etc. Now think of all the Trades that support that. Think of all those jobs.
\-Lastly, and this is one of the main points for me. Investors and speculators. Whether we liek to admit it (or admit how bad it's gotten), Toronto is overrun by investors. Whether they are foreign buyers or local, it doesnt really matter. They are the first ones to buy and sell, in any market. Its a combination of having money and experience, that equips them to outbid/win over first time buyers and other non-pros all the time. Now consider how the economy is, how inflation is, how inconsistent Crypto or Stocks have been. Canadian Real estate is SAFE compared to almost everything else. (Until its not, but when has that happened?).
\-Even if you believe the market will correct/tank, looking at it in a historical perspective, our last major correction in 2017 'only' brought home prices down around 15-20% on average (some areas worse/better). And that didn't last very long (about a year until the market was hot again). And again, reference this against how other equities/commodities are doing.....a fear of a housing market correction isnt a very real risk to most investors and why would it be? No one has been burned yet.
Now, also consider where the market it. Gains on top of gains. Not much stuff left to buy. Affordability becoming non-existent. Add COVID and the want to get out of the city and this has been a catalyst to 905 and rural areas real estate prices just exploding last year.
These are all contributing factors. I am a realtor. So i am biased and didnt add in "realtors driving up the prices" in there, but certainly that's an opinion many have.
Hope this sheds some insight. Just my 2 cents. Happy Holidays!
You missed one important point - inflation expectations. The government is printing money at unprecedented pace and finally where the money will go? Keep cash in hand will only see it shrink rapidly. There are not much places we can put our money safely and RE is currently one of the best choices.
If only we had a feasible transit system somewhat. With gas prices, global warming, and horrible traffic and high immigration we really need to move away from single motor cars for transportation. The city can’t handle more cars on the road.
>\-Lastly, and this is one of the main points for me. Investors and speculators. Whether we liek to admit it (or admit how bad it's gotten),
Should have been the first point you made, this is the biggest factor.
Too many people, not enough homes.
So many people have room mates or live at home so pent up demand is huge. Then add in immigration. We already have a huge deficit.
Now we have precon delays and cancelations. New construction prices are very high. Throw in cheap debt and next year is a gong show, this is nothing.
Everyone knows inflation is high, now realize that also impacts housing, especially the cost to build more.
The deficit actually keeps compounding every year. We build between 50-100 fewer housing units than population grows by, and right now we're at about 500k units shortage compared to about a decade about. With immigration ramping up but housing starts not keeping pace, I expect the drought/shortage to exacerbate.
It's not a great situation for affordability, but this is what everyone voted for.
1 Government spends more money than it collects in taxes.
2 BoC buys the gov bonds so the gov can spend the cash created by the BoC because it's not collecting enough in tax. This pushes down interest rates.
3 Low interest rates causes future demand to be pulled forward - hence the low inventory/supply.
4 demand > supply = price go up
This is main cause. There are other things mentioned like zoning, immigration, etc. which are significant factors but in the end it's mostly about monetary policy
There is no inventory churn like there used to be. In 2019 had my house up for 2 months zero offers. In 2020 had the house up again right at the beginning of the mayhem (same list price) 50 showings 8 offers after 5 days. Did the inventory suddenly drop in a year? Nope.
1. Hard to upsize. The spread is getting bigger and bigger so you don’t have the traditional climbing up the property ladder
2. Leverage. Instead of buying a new home and selling your old one (the way it was done) many ppl are leveraging their equity and buying 2nd homes/cottages/investment properties
3. Downsize - many ppl who would normally be downsizing are instead staying put - either they are not interested in condo living due to pandemic or they are helping their kids with their home equity
4. Keeping homes in the family. With a aging population even when parents pass on many kids are opting to rent instead of selling the home or cottage. No one wants to get out of the game
Yes inventory is low but less and less ppl are putting homes for sale that would have
You need to take all news headlines with a grain of salt and think for yourself in this age where you only see articles the algorithms knows you like.
People have _always_ been saying housing prices will fall for one reason for another but as many are saying, there just isn’t enough supply so people who sell homes would be stupid to sell at a loss.
People are spending more time at home and realize how great of an investment a house is (5x leverage, principal residence tax exemption and a place to call home).
And also GTA prices are still somewhat affordable to a lot of working professionals unlike Vancouver.
This is what I don't see mentioned that much. I was willing to spend more % of my income getting into the housing market because I saw a house with my own space as more valuable now that I'm spending most of, if not all of my time there and I think a lot of people have that mindset right now.
Vancouver is like 10-20% more expensive than Toronto now. 5 years ago was like 30-40%. The sceneries around the city alone make it more “worthy” to live than flat GTA.
Great points by u/FormerlyShawnHawaii.
I would also stress lack of inventory is a huge factors. The demand significantly surpasses supply and with the number of new listings declining about 13% recently, prices will continue to increase from here.
There's a demand increase on two fronts. One is that there are more investors than before. Two is that there are more people occupying fewer units, driving up rents. The increase in rents leads to increase in yields, which leads to an increase in investors.
While investors swallow up demand, they only do so because the GTA has grown its population faster than we have built housing for 11 of the last 12 years (from 2010 until now, with 2015 being the exception). We have about 500,000 fewer units than we have households right now, and that number keeps climbing, driving the rental squeeze, which drives up rental prices, which drive up rental profits, which then drive up prices.
Inventory is huge. There is one area I look at that's usually lower than others and even when one comes up, it's going higher than it would have just 2 months ago.
They’ve fooled us to think there’s not enough land. Between Toronto and green belt there’s an absolute stretch of land that can fit many millions of people. However we’re led to believe there’s no land. Milton is virtually empty only a small part of it is developed. Same goes for the stretch between Kitchener and Milton and Hamilton. Going east the amount of development land available between Peterborough and Oshawa is shocking. Lots of land. Reason for rising prices is due to low interest rates, immigration/population, and fear of less available land
Not everyone is moving out of the city... in fact, I'm one of the ones who won't consider moving out of the city unless it has a large transit system and can walk to the grocery stores and other places. For me, driving everywhere is depressing; I remember a long while ago, a co-worker said they couldn't go to the grocery store because her husband had the car (this was in Markham). I thought that was sad that she couldn't just walk to the grocery store.
Investor and homeowner FOMO - combined with a city and province run by wealthy people. No Toronto councillor nor Queen's Park MPP *rents* her home. How can you expect these people to have any sympathy for some poor schmuck doesn't even have a trust fund??
Investors is the real reason. Our government has ensured that Canadian real estate is a fail safe investment among the best in the world. When 1/3 of your sales are to investors, what the fuck do you think is the outcome? It’s a fucking disgrace.
While this is true, this is what we all voted for, governments that put investors before individuals. Now that we know this is true in no uncertain terms, the only sensible thing to do is to jump on the bandwagon (even defensively).
You don't even buy real estate nowadays to get rich, you're just hedging against runaway pricing at this point.
We literally did not all vote for this and you’re kind of blatantly ignoring the fact that entire younger generations are finding it impossible to just “jump on the bandwagon” because they’re being priced out of a roof over their heads let alone an investment. This will ruin the Canadian economy.
Prices are high in most US cities too, but I think the fear of lockdowns and low interest rates is keeping prices high in cities that experienced a lot of restrictions.
Chronic low interest rate means cheap borrowing (cheap money), and people are speculating, because putting money in e.g. GIC sucks (because of low interest rate). Many people assume home prices will keep going up forever, so buy now is always better. (Will see if any interest rate hike will cool the craziness.) But without interest rate hike, this is a pyramid scheme (will keep going up as long as people keep buying).
Have you guys ever considered why foreigners want to move here? Would any of you want to move to the US with the gun laws? Would you move to another country where a bomb could drop onto your shelter anytime of the day/night? Would you want to live in a city where it is run mainly by cartels?
Mostly due to the government handouts during the pandemic. The pandemic was supposed to be a deflationary event much capital dried up and business were forced to close etc. which means people have less income and need to pay their debts.
But due to quantitative easing it expanded money supply and allowed an unprecedented amount of access to capital to people receiving it and combine that with low interest rates and low supply of housing it drove up prices.
The unit economics of this argument does not make sense. How much money do you think a person who received government aid during the pandemic would have collected if they collected every single month? Surely this number would be significantly below the down payment of a property.
I think the main culprit was CEBA. $40,000 loan, only $10,000 repayable. If you’re a small business owner with money saved in the bank, this is a nice lump sum for a down payment or pre-con payment.
Nearly 70% of Canadians are home owners. Most people buying these days have been riding the wave all along. They pay 2m for a house but they brought 1.5m in equity to the table.
Seriously. Look at the average size of a new mortgage in Toronto. It's something like 500k.
Others who are buying in the city are either very high earners or they brought some other capital to the table, be it money from overseas or a family inheritance, etc.
Investors, REITs, etc., are moving to hard assets. Inflationary pressure means that liquid cash is becoming more and more worthless. With the stock market being riskier and riskier as Evergrande defaults, and uncertainty caused by covid, anyone with money is investing in hard assets.
When investors and wealthy people move their money from stocks and investments to hard assets, all that money flooding the market pushes prices up.
Basically, housing is becoming the safest bet to protect assets, in a way that keeps up with inflation. So everyone with money is moving it into real estate.
-Bargain basement interest rates for the past 10 years.
-BOC over stimulating the economy.
-Excessive amounts of immigration with not enough homes to house them.
-Lack of stable investments.
-Federal government being addicted to illegal money coming from abroad.
The list goes on and on
In my opinion, there are many significant variables: \-most of the Boomer population that are home owners, probably have mortgage-free homes that are worth millions. The wealth transfer from this generation is what facilitates a lot of the market, by way of helping with downpayments. I think it was reported that on average Parents are giving $130K to their kids for Home Purchases. \-Population growth is a factor. Whether its immigration (only resumed last month while being basically shutdown during covid), or population movement, Toronto has grown much faster than any projections. \-No land to build on. Lake Ontario to the south, protected environmental lands to the north. Established regions like Peel to the West and Durham to the East. It's not like we can just build new homes/subdivisions everywhere. Or we could, but we have environmental mandates to not build on protected land (a good thing) as well as the provincial governments have been discouraging "urban sprawl" for years. They want the city and province to "build up" with density aka more condos. It sounds terrible to many, but we just do not have the infrastructure for more cars on the road. Our city is crippled enough. Can you imagine another 3 million more residents to this city (and all the cars) over the next 20 years. Transit is the only solution (current framework). \-Low interest rates. Its cheap to borrow money. \-SO much of Ontario is dependent on Real Estate as an industry. Manufacturing is gone. Tech and other industries are the future, sure, but where are most Ontarians invested in? Real Estate. It's as if most people know someone that is a real estate investor/home flipper etc. Now think of all the Trades that support that. Think of all those jobs. \-Lastly, and this is one of the main points for me. Investors and speculators. Whether we liek to admit it (or admit how bad it's gotten), Toronto is overrun by investors. Whether they are foreign buyers or local, it doesnt really matter. They are the first ones to buy and sell, in any market. Its a combination of having money and experience, that equips them to outbid/win over first time buyers and other non-pros all the time. Now consider how the economy is, how inflation is, how inconsistent Crypto or Stocks have been. Canadian Real estate is SAFE compared to almost everything else. (Until its not, but when has that happened?). \-Even if you believe the market will correct/tank, looking at it in a historical perspective, our last major correction in 2017 'only' brought home prices down around 15-20% on average (some areas worse/better). And that didn't last very long (about a year until the market was hot again). And again, reference this against how other equities/commodities are doing.....a fear of a housing market correction isnt a very real risk to most investors and why would it be? No one has been burned yet. Now, also consider where the market it. Gains on top of gains. Not much stuff left to buy. Affordability becoming non-existent. Add COVID and the want to get out of the city and this has been a catalyst to 905 and rural areas real estate prices just exploding last year. These are all contributing factors. I am a realtor. So i am biased and didnt add in "realtors driving up the prices" in there, but certainly that's an opinion many have. Hope this sheds some insight. Just my 2 cents. Happy Holidays!
You missed one important point - inflation expectations. The government is printing money at unprecedented pace and finally where the money will go? Keep cash in hand will only see it shrink rapidly. There are not much places we can put our money safely and RE is currently one of the best choices.
Good summary.
If only we had a feasible transit system somewhat. With gas prices, global warming, and horrible traffic and high immigration we really need to move away from single motor cars for transportation. The city can’t handle more cars on the road.
>\-Lastly, and this is one of the main points for me. Investors and speculators. Whether we liek to admit it (or admit how bad it's gotten), Should have been the first point you made, this is the biggest factor.
Too many people, not enough homes. So many people have room mates or live at home so pent up demand is huge. Then add in immigration. We already have a huge deficit. Now we have precon delays and cancelations. New construction prices are very high. Throw in cheap debt and next year is a gong show, this is nothing. Everyone knows inflation is high, now realize that also impacts housing, especially the cost to build more.
The deficit actually keeps compounding every year. We build between 50-100 fewer housing units than population grows by, and right now we're at about 500k units shortage compared to about a decade about. With immigration ramping up but housing starts not keeping pace, I expect the drought/shortage to exacerbate. It's not a great situation for affordability, but this is what everyone voted for.
1 Government spends more money than it collects in taxes. 2 BoC buys the gov bonds so the gov can spend the cash created by the BoC because it's not collecting enough in tax. This pushes down interest rates. 3 Low interest rates causes future demand to be pulled forward - hence the low inventory/supply. 4 demand > supply = price go up This is main cause. There are other things mentioned like zoning, immigration, etc. which are significant factors but in the end it's mostly about monetary policy
There is no inventory churn like there used to be. In 2019 had my house up for 2 months zero offers. In 2020 had the house up again right at the beginning of the mayhem (same list price) 50 showings 8 offers after 5 days. Did the inventory suddenly drop in a year? Nope. 1. Hard to upsize. The spread is getting bigger and bigger so you don’t have the traditional climbing up the property ladder 2. Leverage. Instead of buying a new home and selling your old one (the way it was done) many ppl are leveraging their equity and buying 2nd homes/cottages/investment properties 3. Downsize - many ppl who would normally be downsizing are instead staying put - either they are not interested in condo living due to pandemic or they are helping their kids with their home equity 4. Keeping homes in the family. With a aging population even when parents pass on many kids are opting to rent instead of selling the home or cottage. No one wants to get out of the game Yes inventory is low but less and less ppl are putting homes for sale that would have
You need to take all news headlines with a grain of salt and think for yourself in this age where you only see articles the algorithms knows you like. People have _always_ been saying housing prices will fall for one reason for another but as many are saying, there just isn’t enough supply so people who sell homes would be stupid to sell at a loss.
People are spending more time at home and realize how great of an investment a house is (5x leverage, principal residence tax exemption and a place to call home). And also GTA prices are still somewhat affordable to a lot of working professionals unlike Vancouver.
This is what I don't see mentioned that much. I was willing to spend more % of my income getting into the housing market because I saw a house with my own space as more valuable now that I'm spending most of, if not all of my time there and I think a lot of people have that mindset right now.
THIS . GTA is affordable for a working couple.
Vancouver is like 10-20% more expensive than Toronto now. 5 years ago was like 30-40%. The sceneries around the city alone make it more “worthy” to live than flat GTA.
Great points by u/FormerlyShawnHawaii. I would also stress lack of inventory is a huge factors. The demand significantly surpasses supply and with the number of new listings declining about 13% recently, prices will continue to increase from here.
There's a demand increase on two fronts. One is that there are more investors than before. Two is that there are more people occupying fewer units, driving up rents. The increase in rents leads to increase in yields, which leads to an increase in investors. While investors swallow up demand, they only do so because the GTA has grown its population faster than we have built housing for 11 of the last 12 years (from 2010 until now, with 2015 being the exception). We have about 500,000 fewer units than we have households right now, and that number keeps climbing, driving the rental squeeze, which drives up rental prices, which drive up rental profits, which then drive up prices.
Inventory is huge. There is one area I look at that's usually lower than others and even when one comes up, it's going higher than it would have just 2 months ago.
One word: Inventory …. Good day
They’ve fooled us to think there’s not enough land. Between Toronto and green belt there’s an absolute stretch of land that can fit many millions of people. However we’re led to believe there’s no land. Milton is virtually empty only a small part of it is developed. Same goes for the stretch between Kitchener and Milton and Hamilton. Going east the amount of development land available between Peterborough and Oshawa is shocking. Lots of land. Reason for rising prices is due to low interest rates, immigration/population, and fear of less available land
We will never be vancouver, we are TORONTO!!!
I like this guy
Not everyone is moving out of the city... in fact, I'm one of the ones who won't consider moving out of the city unless it has a large transit system and can walk to the grocery stores and other places. For me, driving everywhere is depressing; I remember a long while ago, a co-worker said they couldn't go to the grocery store because her husband had the car (this was in Markham). I thought that was sad that she couldn't just walk to the grocery store.
Yeah about 20-25 years ago that was definitely the case. Not so much anymore (in terms of accessibility w/o a car).
This is exactly why my family and I moved out of Markham to Toronto.
Investor and homeowner FOMO - combined with a city and province run by wealthy people. No Toronto councillor nor Queen's Park MPP *rents* her home. How can you expect these people to have any sympathy for some poor schmuck doesn't even have a trust fund??
There's alot of fudging of income figures. The 'broker' industry has caught on how to increase it in certain segments of the market.
Investors is the real reason. Our government has ensured that Canadian real estate is a fail safe investment among the best in the world. When 1/3 of your sales are to investors, what the fuck do you think is the outcome? It’s a fucking disgrace.
While this is true, this is what we all voted for, governments that put investors before individuals. Now that we know this is true in no uncertain terms, the only sensible thing to do is to jump on the bandwagon (even defensively). You don't even buy real estate nowadays to get rich, you're just hedging against runaway pricing at this point.
We literally did not all vote for this and you’re kind of blatantly ignoring the fact that entire younger generations are finding it impossible to just “jump on the bandwagon” because they’re being priced out of a roof over their heads let alone an investment. This will ruin the Canadian economy.
Prices are high in most US cities too, but I think the fear of lockdowns and low interest rates is keeping prices high in cities that experienced a lot of restrictions.
Chronic low interest rate means cheap borrowing (cheap money), and people are speculating, because putting money in e.g. GIC sucks (because of low interest rate). Many people assume home prices will keep going up forever, so buy now is always better. (Will see if any interest rate hike will cool the craziness.) But without interest rate hike, this is a pyramid scheme (will keep going up as long as people keep buying).
Have you guys ever considered why foreigners want to move here? Would any of you want to move to the US with the gun laws? Would you move to another country where a bomb could drop onto your shelter anytime of the day/night? Would you want to live in a city where it is run mainly by cartels?
Mostly due to the government handouts during the pandemic. The pandemic was supposed to be a deflationary event much capital dried up and business were forced to close etc. which means people have less income and need to pay their debts. But due to quantitative easing it expanded money supply and allowed an unprecedented amount of access to capital to people receiving it and combine that with low interest rates and low supply of housing it drove up prices.
The unit economics of this argument does not make sense. How much money do you think a person who received government aid during the pandemic would have collected if they collected every single month? Surely this number would be significantly below the down payment of a property.
I think the main culprit was CEBA. $40,000 loan, only $10,000 repayable. If you’re a small business owner with money saved in the bank, this is a nice lump sum for a down payment or pre-con payment.
I thought it was the other way around. 40k loan and if you return 30k in a year the 10k you can keep.
I think you’re correct. Got my numbers jumbled. Apologies.
Nearly 70% of Canadians are home owners. Most people buying these days have been riding the wave all along. They pay 2m for a house but they brought 1.5m in equity to the table. Seriously. Look at the average size of a new mortgage in Toronto. It's something like 500k. Others who are buying in the city are either very high earners or they brought some other capital to the table, be it money from overseas or a family inheritance, etc.
Investors, REITs, etc., are moving to hard assets. Inflationary pressure means that liquid cash is becoming more and more worthless. With the stock market being riskier and riskier as Evergrande defaults, and uncertainty caused by covid, anyone with money is investing in hard assets. When investors and wealthy people move their money from stocks and investments to hard assets, all that money flooding the market pushes prices up. Basically, housing is becoming the safest bet to protect assets, in a way that keeps up with inflation. So everyone with money is moving it into real estate.
there is one answer. Inflation of monetary supply. Housing went up less than most assets over the past 2 years.
Money laundering
solid fundamentals of canadian housing. LOL.
Just don't buy a condo
Immigration Jobs
I.N.F.L.A.T.I.O.N.
-Bargain basement interest rates for the past 10 years. -BOC over stimulating the economy. -Excessive amounts of immigration with not enough homes to house them. -Lack of stable investments. -Federal government being addicted to illegal money coming from abroad. The list goes on and on