High House Prices Aren’t Stopping Canadians From Buying. Here’s Why.
The Bank of Canada has held the interest rate steady at 1.75 per cent for six-straight announcements, and economists believe it will remain unchanged for at least another year, the Financial Post reports.
Mortgage rates have also reached their lowest levels since July 2017, now sitting at 2.39 per cent, according to Ratehub. These low rates have attracted more Canadians to enter the market, but have also created more demand and competition, which is driving up prices.
The growth of the population and job markets in Toronto and Vancouver have also increased housing demand. Toronto, in particular, has seen its growing population outpace all other cities in Canada and the U.S.
So how high are the prices in Canada’s biggest markets? The average in Vancouver is roughly $1.44 million; in Toronto, it’s $873,000; and in Montreal, it’s $375,000.
These prices have climbed drastically in the past 19 years, far outpacing prices in the U.S., Better Dwelling previously reported. In nearly 20 years, prices in Vancouver, Toronto, and Montreal have jumped by 316 per cent, 240 per cent, and 189 per cent, respectively.
As a result, less than 10 per cent of Toronto and Vancouver’s wealthiest residents can afford to buy a home in their respective cities.
So when will the prices stop rising? According to Doug Porter, chief economist at Bank of Montreal, there’s no real answer.
“When you’re looking at a market that becomes driven by wealth, and wealth from outside the city limits, then there isn’t necessarily a limit to house prices,” he told HuffPost Canada.
Unfortunately, millennials face the harshest consequences of this. High prices means it will be harder for them to qualify for a mortgage and enter the market. Plus, the fact that more seniors are delaying downsizing means millennials will be left with limited options for affordable homes.
It was previously predicted that Toronto’s housing bubble could burst, but with the rise of home sales, only time will tell which way the market will go.