Red Hot: Canada’s Booming Real Estate Market
Friday May 28th, 2021
Many of our parents lived the epitome of the Canadian dream. Land a good career, start a family and purchase their own home. Decades later, owning a tiny piece of Canada is no longer a dream but a fantasy for many younger generations priced out of a market that has exploded.
While the upward trend of housing prices has been a reality for years, the onset, COVID-19, was seen as a firehose that might’ve doused and cooled off a raging real estate inferno. But, it defied expectations, and the problem itself is multi-faceted, which can’t be solved with a simple band-aid solution. The stories of the people currently trying to navigate it are as complex as the factors that caused it in the first place.
The disparity between incomes and home prices is soaring. The average sticker price for a detached home in Canada in March 2021 was $716,000, up 31 per cent from the year before. Meanwhile, “forty-eight per cent of survey respondents planning to purchase a home in the next two years say their budget is less than $500,000,” according to a recent RBC survey.
It describes Canada’s real estate market as “adjusting,” we’ve experienced a “shock” in regard to how working from home is becoming the new normal and how, because of low-interest rates, it’s easier for Canadians to receive credit to buy a home. Interest rates were kept low to keep people spending money in an economy that had been shaken.
Canada currently has a sellers market, meaning there are more buyers than sellers, and buyers must compete against each other for a home, sometimes igniting a bidding war.
To encourage this, some sellers will intentionally list their home below value to drum up interest and get prospective buyers into a bidding war. Multiple buyers will put in offers and try to outbid each other while the price climbs. During a bidding war, buyers know how many other bidders they’re up against but are unaware of the top offer.
In the current market, homes often receive multiple offers and can sell for tens — if not hundreds — of thousands of dollars over the listing price.