Home » Business » The excitement of the Canadian real estate market. Are we heading for a bubble? – The initiative

The excitement of the Canadian real estate market. Are we heading for a bubble? – The initiative

In its press release published on May 17, 2021, the Canadian Real Estate Association (CREA), indicated that the frantic pace of home sales in Canada slowed down in April. After reaching an all-time high last March (69,702 properties sold), the number of transactions in the Canadian real estate market fell by 12.5% ​​in April, registering 60,967 properties sold. Sales for the month of April nonetheless remain significant and represent an increase of 256% compared to April 2020, when demand for real estate contracted in a context of health and economic constraints.

Properties newly offered for sale in April were 81,124, down 5.4% from March. Indeed, the limited supply and the pressure of demand pushed up prices. The MLS Home Price Index was up 23% year over year in April, representing a 2.4% month-over-month increase. The actual average price of properties sold in the Canadian market rose 41.9% year over year in April to just under $ 696,000. How to explain the effervescence of the Canadian real estate market in this context of pandemic?

How to explain the frenzy of the real estate market

It is good to remember that before the pandemic, all the signals were green (low unemployment rate, sustained economic growth, rising wages …) to make the improvement in the real estate market last, but with the COVID-19 pandemic , uncertainty has settled in this market. After two months of forced shutdown, the market quickly caught up, with an exceptional rebound in June 2020. It was still early to decide on the nature of this trend. Experts expected a lull in the fall with the end of mortgage relief and the reduction of government assistance measures, but ultimately the growth of this market has been maintained, at a sustained pace. Indeed, several factors explain this real estate frenzy: low interest rates, maintenance of government aid, high level of household savings, low stock of houses for sale, standardization of teleworking and the desire to have large spaces, especially with containment.

The dynamics of the real estate market: what consequences for households and the economy?

Real estate market dynamics may support short-term economic recovery, but increase household debt and the risk of collapse if the economy were to experience another sharp shock. In its 2021 Financial System Review, the Bank of Canada expressed concern about household debt and rapidly rising house prices. It is reported that since the start of the pandemic, total household debt has increased by 4%. According to the report of the Canada Mortgage and Housing Corporation (CMHC), the value of residential mortgages granted by Canadian banks in 2020, amounted to 305 billion dollars.

In the context of the current real estate market where short-term speculation continues, a real estate bubble should not be ruled out! This is why several specialists are calling on decision-makers (Bank of Canada, federal and provincial governments) to put in place restrictive and incentive measures (increase the key rate, tighten access to mortgage loans, increase housing starts, etc.) to calm the effervescence of the Canadian real estate market.

Sofiane idir

https://linitiative.ca/leffervescence-du-marche-immobilier-canadien-se-dirige-t-on-vers-une-bulle/https://linitiative.ca/wp-content/uploads/2021/06/Actualite-immobiliere-1_resize.jpghttps://linitiative.ca/wp-content/uploads/2021/06/Actualite-immobiliere-1_resize-150×150.jpgSofiane idirImmovableIn its press release published on May 17, 2021, the Canadian Real Estate Association (CREA), indicated that the frantic pace of home sales in Canada slowed down in April. After reaching an all-time high last March (69,702 properties sold), the number of transactions on the …

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.