There seems to be some lingering conversations within the boundaries of Ontario that the province will soon see a real estate market crash.
With the COVID still ramped and impacting businesses, Ontario is seeing record-setting gains and has some real estate industry observers and market analysts worried about a fall in prices around the corner.
According to an article by Remax, the average semi-detached house in Toronto is selling for $1.7 million. In Simcoe County, the average price of a home has spiked 33 per cent year-to-date, to $600,000.
The Bank of Canada (BoC) noted in its quarterly Monetary Policy Report that the current housing market strength could pose a threat to an economic downturn. BoC Governor Tiff Macklem also warned that “it would be a mistake” for Canadians to treat housing as an investment opportunity, assuming that the real estate market would continue to rise with no ceiling.
According to the Canada Mortgage and Housing Corporation (CMHC), national housing starts surged at an all-time high of 21.6 per cent in March to a seasonally-adjusted annualized rate of 335,200 units.
The BoC stated, “This poses several risks. High prices could result in stretched borrowing and lending, leaving some households and financial institutions more financially vulnerable to an economic downturn.”
Royce Mendes, Senior Economist at CIBC Economics, stated in a note to clients, “The big acceleration came as weather was unseasonably warm in many parts of the country. Red-hot demand for real estate propelled a record month for housing starts in March. While the market will need a long stretch of supply growth to have a meaningful effect on prices, the March numbers are a solid start.”
Perhaps there will be a drop in value or this could be the ‘new normal’ in the real estate market.