We are experiencing very interesting times with the real estate market in Great Toronto Area, to say the least. There are as many thoughts on direction of the market as people who are talking about that. So, we also do not want to stay on the sidelines and provide our opinion.
But first, let’s see what happened in the past years:
As you can see on a graph above, there was no major correction in the market since 1995, a time when the last big correction took place in 1990 – 1995. The houses prices steadily went up with the exception of 2009, and then the big spike happened in 2016.
There is a justification for the price increases in Toronto over the years: people coming to live here every year, mortgage rates are low, and the government created a green belt around GTA. But in 2016 people suddenly started to buy houses like there was no tomorrow and nobody could provide logical explanation to that. It was not uncommon to see houses selling for $200K over asking price!
But bubbles are created by people (remember the tech boom of late nineties and the housing boom in USA in 2005-06?) and they are also destroyed by people. And what quickly goes up, comes down even faster. So, in 2017 we experienced a sharp correction after government announcement of new measures in April.
As we had projected, the prices stabilized around September and even started increasing again but then Bank of Canada increased its rates twice in a row and the new mortgage qualification rules were announced as of January 01, 2018 – all that will make it much harder for people to be able to buy real estate.
It is still too early to see how the market will react, but if you think of buying for investing – our advice is to wait out until things clear out. We personally prefer not to be involved at times of uncertainty and our current projects located in the growing markets in United States.
Contact us if you want to learn more, we will be happy to share more details with you.