Why Is The Real Estate Market So Hot?

May 24, 2016 - Updated: July 13, 2016

 

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The continual price increases in Toronto show no signs of stopping. According to The Toronto Real Estate Board (TREB), the average selling price in the GTA rose 16.2% with the average detached home reaching $1,257,958. 


There are several contributing factors to what has become an unprecedented demand for freehold homes across GTA since the beginning of this year.

 



Tight supply, high demand

According to the Building Industry and Land Development Association (BILD), the number of new detached, semi-detached and townhomes available for purchase in builders' inventory throughout the entire GTA was only 2,751 on April 30 - a record low. In comparison, a year ago there were about twice as many homes available, with the number sitting at 5,171.

On top of low supply, a record-breaking month of April marked 12,085 sales as per TREB statistics, which is a 7.4% increase in sales in comparison to April 2015. This sale growth is coupled with a nearly 27% decrease in active listings in comparison to this time last year. This causes buyers to bid aggressively for the few houses on the market, allowing for soaring prices and quick sales. 

Weaker Canadian dollar

With the loonie dropping to 70 US cents for the first time in 13 years, the increased demand for homes is making this an incredible time for sellers, as they are able to capitalize on higher sale prices. Many people who invested in American real estate when the Canadian dollar was higher than the USD are now selling, cashing in on the low CAD and bringing the money here, looking to buy. The weak CAD is also drawing the eye of foreign buyers, especially Americans, South Asians and Chinese. Areas like Markham and Mississauga that enjoy a strong south Asian presence are experiencing these trends since people are bringing money in from abroad. They view Canada as a country with a stable government, economy and banking system – a safe haven for foreign investment.

 

Low mortgage rates with interest rate expected to hold

Provided that mortgage rates have a tie with inflation, there is a high probability that they will remain low in 2016. The Liberals have indicated that they do not plan to tighten regulations. Moreover, the Bank of Canada has stated that it will not curtail the market since the cost of doing so outweighs the benefits to the overall economy. Deliberately cooling the housing market is dangerous, as it could have a powerful impact on our GDP. In turn, low cost of lending money is motivating first time buyers who find that it is cheaper to buy than to rent.
 

The Trudeau brand is hot, especially internationally!

With Trudeau in office, people are optimistic about Canada’s future, with expectations for a further improved economy. Private sector investment is likely to go up and unemployment to go down. The more money people make, the more likely they are to look into buying rather than renting.

Moreover, the liberal government has committed the better part of 20 billion dollars to infrastructure making real estate a good market for international buyers. Trudeau is well recognized and his policies are well supported by the public. He is the young, fresh face of Canada! This further explains the trend of rising foreign investment.

 

May 24, 2016

Team Riaz Ghani

 

 


Tagged with: real estate market watch investing buying selling
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