Even casual observers of the housing market have watched with wonder and/or dismay what’s happening to prices. And not just in Toronto and Vancouver, as the there’s been a spill-over effect that extends in growing rings, even to this region, as witnessed by the average cost of a single-family home having surpassed $1.2 million.
Despite the economic downturn and ongoing uncertainties due to the COVID-19 outbreak, home prices are becoming even less affordable (not to be confused with newfound efforts in the region to marginally increase the housing stock for the most disadvantaged).
The province’s approach to soaring housing prices essentially involves giving developers freer rein to build more units more quickly. That ignores concerns about the protection of land, neighbourhoods and the likes of heritage properties, among other issues. There are also limits on construction itself, particularly labour and supplies.
Even if no restrictions applies, people are arriving in this country – most of them to the Greater Golden Horseshoe – at rates well beyond the capacity to increase housing stock.
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Already, many people – especially younger ones, but increasingly cutting across demographics – despair of owning a home as the economy sinks, works become more precarious and, sometimes inexplicably, housing costs rise.
With prices, government policy is largely to blame, mostly through immigration and, down through the ranks, poor land-use planning and growing taxes and fees.
The big issue, of course, is whether we’ve got a housing bubble … and when it will it pop.
Not just yet, apparently, as the market continues to heat up. Even in this region, sales each month reach new heights, as do costs. The Kitchener-Waterloo Association of Realtors reported the average sale price for all residential properties in the area was $1,007,109, a 33.6 per cent increase over February 2021 and a 5.6 per cent increase compared to January. The average price of a detached home was $1,214,067, up 33.1 per cent increase from February 2021 and an increase of 5.3 per cent compared to January.
Studies show rising prices in Toronto are pushing buyers not just to the outer edges of the GTA but to places farther afield, such as Waterloo Region. That trend has been accelerated by the pandemic-led transition to working from home.
Average home prices are now far out of reach of many residents, which doesn’t seem sustainable. Some economists and market watchers are waiting on a correction. Still, there are plenty of us who see housing as a safe investment, unlike, for instance, the stock market, which remains volatile. Both markets are a gamble, however, and both were and continue to be heavily manipulated by the financial sector, the very industry responsible for the systemic corruption at the root of our economic woes.
Speculation, of course, is another word for gambling.
There’s a simple reality, however: housing prices do not always go up.
Price decreases could help those looking to get into the market down the road, but that upside could be offset by the fact credit is harder to come by. Lenders are hanging on to their money, and tightening requirements when they do part with it. Today’s rampant inflation and potential for higher interest rates could have an impact on future buying patterns.
If there is a take-away lesson to be learned when it comes to real estate, it’s don’t take any undue risks. And gambling, which is how we’ve been viewing the housing market, is risky to the core. If we keep betting on ever-increasing prices – with equity loans to match – and allowing too many people to over-leverage themselves, there’s going to be a great deal of pain if the market sees a correction or if interest rates start rising to historical levels. Don’t wager the farm on the boom times lasting forever.