Canada’s long housing boom has already begun to cool dramatically in the wake of rule changes aimed at what many feared was a housing bubble, particularly in Toronto. The fresh rate rise is expected to exacerbate the slowdown.
The psychology of the market is that people are saying ‘The party is over; the era of sub-3 percent mortgages is done.’ But according to economists, we have definitely popped that bubble, which could make things a bit easier for would-be buyers in the months ahead. While the slowdown in terms of prices and sales have dismayed sellers, the buyers welcome cool down in Toronto’s housing market.
Considering the current benchmark, a typical home in Toronto area may absorb 13 years of “median household income.” Perhaps, if we consider the global market, per square meter home price in Toronto ranks 14th after London, New York, Paris and Tokyo (plus 9 more). So, while the Toronto houses are costly for the Canadians, they are actually quite cheap to the foreign buyers.
Another factor that needs to be taken in account is the active listings in Toronto. The available homes for sale jumped 35.2 per cent YoY in March 2017. It means the supply of available homes is 0.65 down from 1.18 last March. It reflects the tightness of the market. Now, people (mostly foreigners) are buying homes in Toronto as their profitable investment.
While Canadians are complaining against increasing lending rent, it can actually play a catalyst role to settle down the Toronto market froth. The increment of foreign buyer taxes is a good decision but the value of Toronto homes is still cheap in the international market. So, it can be assumed that the Bank of Canada will again play their trump card of “bumping lending rents” to control the Toronto housing bubble.