No one would have imagined that the COVID-19 pandemic would be the catalyst for an unprecedented growth in the Canadian housing market. Since 2020, home prices have continued to break all manner of records. In March 2022, the national average home price was $887,100, a 27% year-over-year price growth. This was the highest year-over-year price increase ever seen in the Canadian housing market. Cities with the highest increase in home price include Ontario, Toronto and Vancouver.
So, why are home prices in Canada going through the roof?
Here are some reasons:
Low interest rates
As soon as the pandemic started, the Bank of Canada reduced interest rates to a record low of 0.25%. Since mortgages were now more affordable, many Canadians rushed to take advantage of the low interest rates. According to the Canadian Real Estate Association (CREA), 552,423 homes were sold in 2020, and 630,634 homes sold in 2021. Naturally, the high demand for homes resulted in a significant spike in home prices across the country.
From restaurants and airlines to schools and hospitals, Canada is experiencing an acute post-pandemic labor shortage. This has forced many businesses to reduce hours, curtail operations or even shut down temporarily. To boost the economy and fill vacant jobs, the Canadian government has been opening its doors to more immigrants. In 2022, the government is considering 411,000 new permanent residents. The influx of immigrants has resulted in more demand for housing, and thus higher prices.
Increased foreign money
The influx of foreign investors is another major reason why housing prices have increased drastically. These investors often come with large amounts of money ready to buy different kinds of property. This has created major competition with the local investors, as a result driving up property prices. In an attempt to reduce speculative demand and cool the housing market, Prime Minister Justin Trudeau recently announced a two-year ban on foreign home buyers. In addition, a higher tax was imposed on individuals who sell their home within one year.
Low housing supply
The increased demand for housing has led to a severe shortage of inventory. Though the Canadian government is pushing for the construction of more homes, it will take some time before the imbalance between supply and demand is eased. Meanwhile, home prices will continue to rise.
With the high demand and low inventory, finding a suitable property in the current housing market can be a challenge. The good news is that Regalway Homes can help you find a good, affordable investment properties at your preferred location. Get in touch with us today by booking a free consultation below.