Why Aren’t Toronto and Vancouver Home Prices Going Down?
A million dollars just doesn’t go as far as it used to in Canada’s two hottest real estate markets. Over the past few years we’ve seen property values in Vancouver and Toronto grow at breakneck pace with no signs of stopping.
The record-high prices in the cities have created a major concern for housing affordability going forward. Everyone has an opinion on it, but few people have a clear solution or idea of what’s causing prices to stay so high.
Many people have blamed wealthy foreign buyers of buying up property, leaving them vacant and driving up prices. However, experts tend to agree that even if foreign buyers contribute to the problem, it’s not clear how much of a factor they really are.
So in order to get a better picture of the situation for those who haven’t been following the market their whole lives, the Huffington Post has shed some light on the matter.
Everyone wants to live there
Toronto is arguably the cultural capital of the country and enjoys status as the most internationally recognizable city of Canada thanks to high profile celebrities like Drake, events like TIFF, and recent sporting events like the 2015 Pan Am games and the NBA All-Star Weekend.
On top of that, both cities have huge growing economies with just the two places accounting for 75 per cent of the country’s job growth. These conditions attract just the right kind of demographic that are looking for their first home or their first upgrade. HuffPost says to expect a slump sometime around 2018 when most people who are in a position to buy homes already have one.
There’s no more space
When you think about it, Vancouver is basically an island. It has no room at all to expand and that makes the land value skyrocket. Toronto certainly has room to grow, but it’s held back by its infrastructure and city development restrictions. With many people having to travel to the city core for work even if they live in the surrounding municipalities, travel times are nightmare during rush hour in the city. Improved travel times could drastically ease the pressure to live as close to the core as possible, which could spread demand out to more areas and ease price growth in the city.
Low borrowing costs
The Bank of Canada is holding its overnight rate at the lowest they’ve ever been. And mortgage rates have dropped correspondingly as well. WIth borrowing costs lower than ever, people are more comfortable getting larger and larger mortgages to buy. The more activity in the market the more prices will grow.