When Should You Buy
When Should You Buy
Many homeowners and homebuyers feel confused about the state of Canada housing market so far in 2018. While experts projected housing market activity to be more balanced in 2018, the continued volatility has put some on edge. In a number of Canada's most attractive markets, home prices have been increased as sales numbers are declining sharply.
However, outside of the few markets where constrained supply and compelling demand stories are muddled with low-interest rates, affordability and valuations are very healthy in other regions. Despite some consumers' fears, leading experts do not believe challenging valuations in key markets will lead to a nationwide housing bubble that threatens Canada's economy.
From the end of 2016 through early 2017, signs of speculation drove up prices by over 30 percent and caused housing market bubbles in major metro areas. The accelerating prices alongside more property lending, speculation, and increased investments by foreign and domestic buyers were all clear sign of a housing bubble developing. However, leading economists believe that housing bubble is now deflated.
In comparison to the late 90s, housing prices today have tripled across Canada. The market correction has been underlying in different regions at different times over the past few years. In some metro areas the market correction is several years old, but in other regions, it began just a year ago.
The oddities in the market, like prices increasing while sales volume declines, is due to buyers and sellers contrasting views on what the housing prices should be. The sellers have an anchor price they feel entitled to based on similar market activity or recent precedents set. Buyers see the inventory climbing and anticipate that prices will drop, so they are less willing to meet a seller's asking price.
In some regions, there's been a decline in demand due to stricter mortgage laws that were implemented. Fewer and fewer Canadians are able to qualify for these mortgages, and when it's concerning a condo, the complexities involved can become even more challenging. There are lean levels of unit available for sale in the condo market and the resale market. We could see these levels and prices rises slowly throughout the year as more condo construction is completed.
Many homebuyers local to these metro areas are relying on the last affordable options available, like condos and townhomes, otherwise, they're forced to live out in the suburbs and have a sizable commute before reaching the heart of the metro area again. Otherwise, these buyers are simply holding off as they see detached home prices softening, waiting for prices to stabilize and bottom out.
The popularity of Canada's condo market also suggests that many buyers are rushing into the housing market before they are ready. Many are borrowing from family members based on the irrational fear that prices in the housing market will always be on the rise. However, condos are not the best option for investing in real estate since its only ownership inside a building not over any actual land. In addition, the value of the building declines over time.
Canadians interested in investing in the housing market may be best served by waiting until they can afford the down payment on a standalone property with actual land attached to the ownership.