Highlights:
- Canada Housing Crisis
- GTA Real Estate Market Updates
- Borrower’s Dilemma
Canada Housing Crisis:
The Canada Housing Crisis has been on the radar for quite a while. GTA is one of the most popular places to live and work. During the pandemic we saw a lot of movement from Toronto to other parts of GTA. As employers are now expecting to start working from the office, a number of people who moved out of Toronto have started to come back. Second important thing to consider is the influx of international students. Since Fall 2021, we are seeing all international students joining in-person classes, and need a place to stay.
According to a report published by The Canadian Urban Institute, City of Toronto and Canadian Centre of Economic Analysis, “demand for the new housing in Toronto far outweighs supply. There is also a long waiting time for both social and community housing, which is around five to seven years.”
Ca.Investing.com reported David Rosenberg’s views in which he said, “The crux of the issue lies in Canada's inadequate supply, particularly for residential real estate, which cannot accommodate such immigration-driven population growth without further straining an already-overburdened housing market.”
Low supply and increased demand has pushed rents up and is putting strain on the living conditions.
Canada has embarked upon an aggressive immigration policy. It will certainly expand the demand and supply gap in the housing market as newcomers prefer to live closer to the major cities in the hope of finding work opportunities.
Let's not expect a quick fix to this problem!
GTA Real Estate Market Updates:
GTA Real Estate Market sentiment is getting better.
I picked the trend in January 2023 when my clients actively started making buying decisions. Signs are that buyers are adjusted to higher borrowing costs and considering benefits of lower prices.
Having said that, prices are also looking to improve in GTA as the number of sales listings have increased as compared to the last six months, but still not meeting the demand. TREB’s report also shows that sales and average selling prices are gradually improving.
As mentioned above, the need for housing is expected to show an upward trend during summer months as newcomers prefer to arrive between April and November. In my opinion, GTA rents and home prices are going to go up during the course of the rest of 2023.
Borrower’s Dilemma:
More people want to buy homes, but home ownership is becoming a challenge for many Canadians due to two reasons, one is the cost of borrowing and second is the increasing prices. As the borrowing becomes expensive, borrowers are suffering simply because a major part of the payment is going towards interest!
Canada Mortgage and Housing Corp. (CMHC) released fourth-quarter financial results showing that a growing share of its insurance is covering homes where the loans are close to or underwater as the recent drop in home prices has eroded borrowers’ equity. Canadians will continue taking debt, as that is the only way for them to own a home, but as a result of the high cost of borrowing, the debt-to-income ratio is at 180%, alarmingly risky for most Canadians!
More than 14% Canadian’s incomes are now being consumed by escalating debt-service costs.
Interestingly, this is not impacting the real estate market given the persistent level of housing demand, the moment we saw the pause in the interest rate hike, buyers in waiting for further rate hike, have entered the market to buy and hence willing to take a bet on the real estate market.
This content was originally published on LinkedIn.