Canada’s Hot Real Estate Market
Canada is a country deeply reliant on real estate. The industry accounts for roughly 12 per cent of its gross domestic product. In British Columbia, real estate and related fields such as construction and finance make up an astounding 40 per cent of GDP. Vancouver is seeing prices rise again after numerous efforts to cool the market. And in Alberta, not even a recession and a nine per cent unemployment rate did much damage to house prices in Calgary and Edmonton.
“It’s surprising how well it has held up, given the severity of two years of contraction,” says Todd Hirsch, chief economist at ATB Financial.
But in a country obsessed with real estate, the Toronto market is now the biggest problem surpassing Vancouver as the center of housing insanity and a troubling example of what happens when homes are no longer seen as just places to live, but as a path to riches. Even skeptics who once deployed euphemisms such as “robust” to describe Toronto real estate can no longer ignore the troubling forces at work.
Douglas Porter, chief economist at BMO Financial Group, used to be in that camp. Now he says “bubble” is the only way to describe Toronto.
“We’re trying to send a message to both policymakers and potential buyers that we are on the verge of getting into a dangerous place,” he says. Equally troubling is that economists don’t see anything on the near horizon that will reverse these trends. The housing market might just get even crazier.
Prices are growing even faster in the surrounding suburbs. More first-time homebuyers and investors are looking to Barrie, Ont., a city about 100 km north of Toronto, where the average selling price jumped 33 per cent compared to the year before. Even real estate agents are surprised. Chris Messecar, a local realtor, listed a semi-detached home in March with an interior that hadn’t been updated in about three decades. On one night during the bidding period, a woman was murdered about a kilometre away from the home. The incident did nothing to dissuade potential homeowners. “Only one agent reached out about it and said they were somewhat concerned,” Messecar says. He received 11 bids, and the property sold for $104,000 over asking.
