Lack of supply is not responsible for Toronto house prices

A recent study in Toronto proves that lack of supply is not fueling Toronto home price. Rather, demand is increase from both foreign and local investors whose rush to buy in the housing market is fueled by market spectator projection of further price increases. In the expectation of a bubble of increasing prices, buyers are rushing at the few available homes in the market which many say increases on home prices. Based on historical data, Simon Fraser University assistant professor Josh Gordon for the Ryerson City Building Institute in Toronto, in his reports states that supply has maintained its paces with the growing over the years. However, the demand for homes is outpacing supply as home prices scare buyers into expecting further hikes.

Another contributing factor toward rising prices is the wait and see approached held by numerous home owners. Many of them are holding to their properties to see the market plays out and also determine the best period to put their homes on the market.
Evidently, there is a clear existence of a lack of new listing according to Gordon but is as a result of an high level of demand driven by projections of market spectators. This increasing trend will definitely lead to a bubble burst at some point in time. But several other reports do not correspond to Gordon reports as they claim that the only way out for Toronto is to increase on the supply of new affordable homes in the market. Furthermore, the Ontario Real Estate Association is also in line with this claim as they are also urging constructors to develop more homes.

Yet still Gordon goes on to argue that data shows that Toronto’s population to the supply of new homes has been moving in the same direction. This implies that supply is essentially not being outpaced by the growing population. Although supply does have a slight impact on housing prices, the larger increase is because of the involvement of foreign buyers and local investors buying multiple properties. Hence in a real estate market that is driven by panicking, not even a higher supply level will help calm the situation. However, one of the only possible measures to cool down market spectators is by diverting their expectation instead of adding on supply which will continue the rapid purchasing cycle.


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