Canadian home prices are overvalued by about 10%? Try somewhere closer to 54%, according to the Economist. And April was supposed to be a slow month for housing starts with only 204,000 starts predicted nationally? The starts actually equaled 244,900 – a huge increase from the forecast. And if the condo market needs such a keen eye kept on it, why were there 27% more condos built in April of 2012 than there were in April 2011?
Blame it on demographics. Or rather, attribute our nation’s unique demographics not to the housing bubble, but as the element that keeps our economy humming along – and keeps bubbles at bay.
Before panicking about a bubble situation, Canadians need to first look at what’s actually causing the housing bubble, says Jason Heath of the Financial Post. Especially in Canada’s biggest cities, where bidding wars are taking place over Toronto mortgages in some of the highest-end neighbourhoods there are. While prices on these homes go up, up, and up, the rest of the city remains relatively the same – out of a bubble, and relying on the pricier homes as one of the driving forces of one of the best housing markets in the world.
But those are high-end homes, probably with two or three floors and sprawling lots. So what about the condos? Isn’t that where the majority of the concern lies, anyway? Yes, it is. But there’s no reason to fear there either, and it’s because Canada’s demographics right now are made up largely of condo lovers.
Baby boomers, says Heath, are soon going to be moving out of their two-storey single-family homes and move into a condo that’s all the space they need, and that lets someone else take care of all the small issues. And Canada’s young? They’ll “do what’s been done in the likes of New York, London, and Tokyo for years – they’ll buy a condo,” says Heath. At least, if they want to live in any of Canada’s biggest cities and are looking to take on a Vancouver, Montreal, or Calgary mortgage.
And then there are the new immigrants. Canada is known for being a melting pot, a multicultural nation – and it’s a good thing, too. According to Heath, 70% of Canada’s new immigrants relocate to the “big three” – Vancouver, Toronto, or Montreal. And what type of housing are they looking at when they get there? Condos! Condos that are close to their jobs, close to their cultural centres, and close to different communities.
But if you don’t believe Heath over at the Post, take a look at what CMHC had to say in their recently released annual report. “Clear evidence of a bubble is lacking [and we] continue to monitor very closely housing prices and underlying factors such as demographic and economic fundamentals and financial conditions across all major urban centres, including condominium markets.”
