We can say that most are aware of the housing market reaching a record high, but are we aware of the risks this threat poses? The market is weakening and four major cities are about to be affected.
The hot market zones such as Toronto and Vancouver seem to be on fire, but other cities including Halifax, Calgary, Quebec, and Edmonton are slumping.
Don Campbell, a senior analyst with the Real Estate Investment Network said: “The reason is their economies are incredibly flat and you will see housing really start to slow down.
He went further on and added that “It’s simple economics that explains why they’re underperforming.”
Some cities including Vancouver, Victoria, Toronto and Hamilton appear to be receiving massive double-digit gains in house prices in accordance with a Teranet-National Bank house price index released last week.
The report index indicated over 10% gains in Hamilton, Vancouver, Toronto, and Victoria, and when combined with the even growth in the country’s seven other regions, results lead to an overall price growth of 1.8% compared to last month.
Unlike last year, the house prices have increased by 9%. The average price of a house is now estimated to be about $564,455.47.
National Bank economist, Marc Pinsonneault said: “The dichotomy continues on the Canadian home resale market”.
He believes that the other seven housing markets including Ottawa and Calgary are about to witness a correction.
“Those markets behave totally differently,” said Pinsonneault. “As an economist, the Canadian real estate market seems to be Balkanized. If the bubble burst, as you say, there should not be much spill over to the rest of the country.”
Campbell also believes so.
“What happens in Toronto and Vancouver when values stop growing is national headlines,” says Campbell. He added that “It will negatively affect consumer confidence and that will drive consumers to tap the brakes a little bit in other markets but it doesn’t change the dynamic of the market overall.”
Pinsonneault doesn’t expect the U.S to reduce their prices. He believes that Vancouver might reduce their prices between 10 to 20 percent provided that the foreign capital the city benefits from has dried up.
When it comes to real estate, investors would try their best to adapt to a better stock-market mentality which ensures they maximize profits, say Campbell
“People have brought the stock market to a non-stock market investment and they’re trying to time it and they don’t understand that values go up and down,” he Campbell. “Strategic investors and homeowners should be hoping and praying for a boring real estate market so they don’t have to ride the highs and experience the lows.”