Canadians Will Keep Buying Houses Even With Prices Going Through The Roof
But it's still going to be hard for millennials to buy a house.
Just when Canadians might have thought the housing bubble was about to burst, exactly the opposite seems to be happening. Even with higher housing prices in Canada (that will continue to rise), Canadians are still continuing to buy houses.
The major contributors to steady housing sales are high demand and low interest rates. In Toronto and Vancouver, housing sales were up 24% in July 2019. That's made even more surprising by the fact that these cities were ranked the 12th and 4th most expensive cities in the world to live in, respectively.
Other factors that have contributed to the housing market's success include population and job growth, particularly in the last year. In a report from BMO, senior economist Sal Guatieri wrote that the Canadian home market is "well positioned for at least moderate gains in sales and prices in the year ahead."
This might all be bad news for millennials thinking that the price of a house may drop soon, thanks to a bursting bubble. Still, there's a lot of risk in a housing market driven by extreme wealth.
Speaking with Huffington Post, Doug Porter, chief economist at Bank of Montreal, said, "When you’re looking at a market that becomes driven by wealth, and wealth from outside the city limits, then there isn’t necessarily a limit to house prices." He cited Hong Kong, the city with the world's least affordable housing market, as an example of what could happen elsewhere.
Another issue tied to the demand for housing is the fact that older Canadians are buying houses that should be available for millennials. According to a report from the Canada Mortgage & Housing Corp (CMHC), more seniors are choosing to stay in houses rather than moving into retirement homes or rentals. This is due to a number of factors, including a larger concentration of wealth and employment among older Canadians.
Millennials may just have to keep living the apartment life for the next few years.
Disclaimer: Cover photo used for illustrative purposes only.