Yes they’re all in a big speculative bubble.Homeowners are delusional that this is not the case and use any speculative statement to define it not being bubble.Like lack of supply or immigration.
The facts are Canadians view there homes like investments vs homes.This is actually a terrible way to view home ownership and causes massive speculative bubbles.The real estate industry is massive and has bags of cash to lobby governments to protect its interests.
Therefore all the media and news has a common theme that is advocating for the real estate industry.Fundamentals are the best way to define a bubble not speculative statements like immigration or lack of supply.Neither are factually correct.
In Toronto and Vancouver there’s massive supply it just moves to quickly.Immigration has stopped since COVID-19 and likely won’t return to pre pandemic levels for years to come.Fundamentally speaking you have to look at average income vs home prices.
In Toronto the average salary is around $60k yet the average price of a house is around $900k.The two are miles apart.So that means who is buying the houses?
Mainly domestic speculators and foreign speculators.If anybody is buying a home because they believe it will go up in value they’re a speculator and that is a fact.I did a survey around a new subdivision in Milton on who was buying the homes.
I went door to door.I found out that 10% were unoccupied likely foreign investors.51% were speculative purchases and were being rented it out or people had just purchased to sell straight away probably to another speculator.
But seriously those stats show you what is going on for real.Over 60% of the transactions of those new homes were speculative.Take that 60% supply reduction away and suddenly home prices will fall.
Its simply pure fantasy that people thing home prices will never go down.This is another fundamental fact that we know we’re in a bubble.Because when people accept that they could lose hundreds of thousands of dollars and they can afford to lose it then we would not be in a bubble.
Because by not accepting risk Canadians are essentially building a housing bubble propped up on fear.What happens when prices start to seem to only be able to decline?Panic and the house of cards collapses and lots of Canadians will be left holding the bag.
Fundamentals always trump speculation.However when this house of cards collapses literally nobody knows and that is a fact.So all these media articles you see which try to predict the future are about as much use as a chocolate teapot.
I have been, until 2020, inclined to think that the housing markets in Canada generally and in Toronto and Vancouver specifically have not been experiencing a bubble simply because there has been strong domestic demand for housing.There are certainly speculative elements to the Canadian housing market, but by and large the housing market has been driven by a need for new homes.Not only has the Canadian population been experiencing strong growth, through net immigration and through natural increase, but household sizes have been falling.
High housing prices reflect high demand.Mind, this was before COVID-19 became a global catastrophe.We in Canada are now faced with a situation where collapsing incomes mean that we will not be able to satiate our demand for new housing.
I disagree with Sherman Brown.First of all, Toronto and Vancouver are experiencing a boom, not a bubble.Bubbles burst.
Booms may slump due to seasonal factors and other economic influences.Coronavirus will have little effect on housing prices.It is a relatively short-term thing that may result in some people being laid off if their employers have to close up for a period of time, but it is unlikely to result in long-term unemployment.