The Ontario Housing Bubble – Whats Going On

If you’re living anywhere in southern Ontario you are aware of the crazy price of homes and what the market seems to be dictating as value.  Homes are selling for more than what owners are asking, sometimes significantly above asking price. What is feeding this unsustainable appetite and value in homes? There are a few factors.

  1. They aren’t making anymore land
  2. Investors looking for investment properties
  3. LOW interest rates
  4. Unseasonable nice weather

The perfect storm is brewing in Canada’s housing market.  I have outlined some of the reasons why I think that home owners and home buyers should really watch what they are doing and understand what could happen.

  1. Condos are being built in Toronto to satisfy a seemingly unquenchable thirst for homes.  Toronto has more high-rise cranes and buildings under construction than any other city in North America.
  2. We have incredible low interest rates allowing some people to become homeowners that probably didn’t save enough capital to really be financially stable.  As has been indicated, the Government plans to start increasing interest rates.  This will inevitable increase the number of foreclosures and really push some people to the edge of financial stability.
  3. Gas prices are high, really high, and only increasing. The same people that are financially strapped with a variable rate of 2.1% or some value are going to be affected by increased gas costs.
  4. Once we hit that mark here in Ontario where foreclosures start to increase its going to be a slippery slope.  The increase of foreclosure supply will likely offer new opportunities to buyers who may have purchased one of the now overabundant condos.  Condo builders will start to offer better purchase points on their units driving down overall value.
  5. The keystone is foreign investors and investment property owners who always watch investment value and ROI.  As home value slip in Toronto they will look to take out their profits over the last few years and significantly increase available supply.
  6. Suddenly the market is flooded with homes for sale…. An overabundance of condos, an increase in foreclosures, and a sell off of foreign investors and investment property owners.  With that much supply values will plummet.
  7. If you’re a new home buyer or happened to sell your house at the peak… It will then be time to buy again.

This is simply my opinion and my prediction.  I urge you to do your own research and understand the situation here in Toronto; you can then assimilate your own opinions and thoughts on the topic.

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