The Irrational Driving Expectations Of The Canadian Housing Market

A $21 million home in Canada, more or less generally looks like the Toronto pile Conrad Black recently put on the market – a nine-bedroom, 11-bathroom, 23000-sq. ft. Bridle Path mansion complete with coach house and 2.6 hectares to call your own.

It is irrational to think that home prices will keep this pace forever, despite their ability so far to defy gravity and so many predictions of a housing crash.

Most rational people, even the most optimistic of homeowners, know that 17 per cent of gains per annum are not sustainable. The most important thing is the effect of double-digit increases on home-buyer and home-owner expectations.

The average home value in Toronto rose 15 per cent, according to the figures from February, while the Vancouver average was up 20 per cent. The more attractive annual prices increases are, the more expectations will rise.

As the thinking goes, maybe the average house won’t be worth $21 million, but considering the fact that dumpy teardowns in hot markets in Vancouver and Toronto are already selling for seven figures, it’s not a stretch to think the average home will be worth at least a few million dollars not too far down the road, is it?