I’ve heard lots of speculation that the real estate market is due for a correction but it has yet to happen, why?
Housing bears are convinced: Canada’s inflated real estate market especially in and around Toronto and Vancouver is overdue for a massive correction.
They have plenty of evidence to back up their hypothesis:
- Cap rates are low in most major Canadian markets, which implies landlords are content to make up a lack of rental income via capital gains.
- Valuation metrics like price-to-household income and price-to-rent ratios are at record highs.
- And the Bank of Canada continues to raise interest rates.
But there’s plenty of evidence real estate can keep growing or at least stay on this plateau for a while.
- Immigration is still strong and most of these new Canadians are choosing to settle in our largest cities.
- The world is filled with expensive real estate; Toronto and Vancouver are hardly unique there.
- And the economy is still going strong and may continue to do so, especially if Toronto becomes a technology haven
There’s evidence for both a crash and continued strength, so what’s going to happen?
Personally, I think we’re in a new reality where real estate remains expensive in our largest cities. Any significant downturn will be met by a rush of investors looking to get back in before prices appreciate again, offering support on the downside.
I think that if you can afford the payments then now is a good time to buy, don’t wait for a crash that may never come!