Chris Kapches, president and chief executive officer of Chestnut Park Real Estate Ltd warns that Toronto’s real estate market is approaching a breaking point.
Shortage of home supply in the Canadian housing market motivated a lot of buyers to chase after the limited home on the market. In January, homes for sale were sold with 19 days. This indicates a high demand for homes in the market as in the same period last year; homes were sold in 29 days and at that point in time, home prices were record high.
One of the contributing factors for the lack of supply is that home owners are holding on to their properties, as it becomes very expensive for them to find other properties to move into. They also have to consider commissions, legal fees and land-transfer taxes.
The Bank of Montreal is still holding on to its claims that the Toronto area is going through a housing bubble as home prices are increasing at a faster rate.
Chief economist Douglas Porter suggests that market spectators in Toronto should wake up to the reality that the housing market has gone beyond economic necessities and it is at risk of becoming overheated.
According to Porter, with the current state of the market, it has become very difficult to find measures to cool down the market prices.
The likelihood for any step taken to address the housing prices to succeed is very slim.
Robert Kavcic, senior economist at BMO says predictions in the market are a contributing factor affecting home prices. Housing onlookers are attributing the lack of supply as the reason for the high home prices as a result of bidding wars.
Some also claim that the government should remove restriction on certain areas so that more land will be made available. But for Kavcic, this will not solve the supply issue in the midst of a growing population.
Economist at Capital Economics, David Madani emphasizes that the Toronto housing bubble is expected to grow bigger as home price inflation is projected to reach 25% this year.
But for Madani, making homeownership as an investment by homeowners and investors is one of the main reasons fueling home prices. This leads buyers to want to buy more despite high home prices as they fear further price increases.