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Housing market in Canada is booming

After spring’s real-estate boom in Canada it was not expected that the market would jump to a new high and make records. Despite the pandemic lockdown, in 2021, the housing market has jumped up to 8.6% in sales Up until this point. Which is the biggest increase since July 2020. During summer the market dropped and decelerated, it was assumed, the market would continue with that pace. But in October the average house prices increased by 18%, reported by 100,000 realtors across Canada and now the cost of house ownership is $716,585 in Canada compared to the same month a year earlier. And experts believe it will continue to increase. Also the new record on sales means 581,275 houses have new owners now compared to 552,423 houses through the entirety of last year. “After summer where it looked like housing markets might be calming down a bit, October’s numbers suggest we might be moving back toward what we saw this Spring, with regards to current market demand and supply conditions,” CREA chair Cliff Stevenson said.

 

Supply and Demand story

After the pandemic started it brought skepticism and fear to the housing market as it did to people. During the pandemic the legislators decided to decrease loan fees to the lowest possible range. It was assigned in order to boost the economy but finally it ended up making an unbalanced supply and demand market. Because the available houses for buyers were fewer than their demands. This is why most of the houses were sold instantly after they became ready to use. As CREA’s CEO said: “We need to build more housing.” On the other hand Canada Bank is going to raise the interest-rate. This decision has encouraged lots of buyers especially amongst younger generations to buy a house as soon as possible while the interest-rates are still low to pay. Economist Benjamin Tal believes that panic of price increase is part of the housing market’s acceleration. Since prices are expected to increase at some point next year. He said in an interview: “People are starting to sense that interest rates are rising and will be rising in the future.”

 

Parents’ Bank

Reportedly many of the buyers are young people. Which raises the question, how could young people afford to buy houses while they have just started their careers and the prices are much higher than their incomes and savings. The answer is their parents. Parents have contributed financially to their children so that they could Also benefit from the interest rates. Almost one third of the first time buyers have received such Financial assets. In small towns the contribution averaged at $82,000 while in big cities such as Vancouver and Toronto the contributions were as high as 180,000.

 

The future of house market

It seems that nothing will change without changing the supply and demand in the market. The only solution, as the experts have stated, is increasing affordability by building new houses. By making a balance, lower prices are expected and there is hope for halting the widening wealth gap. This is also a huge political issue which all major politicians have to address. For example Shaun Cathcart, senior economist with the Canadian Real Estate Association (CREA) said in an interview “Our message has been, like, build, build, build,”. Also he said: “Keep building. Like, make it a national project…I’m not sure exactly how you do that, but it seems like if you want your kids to be able to afford a home, like the previous generations had or to be able to live in the neighborhood that they grew up in, you know, we might want to start building more housing because what’s there now is, sort of, kind of occupied.”

Source: cbc.ca

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