House price rise in GTA – is it a bubble or a Balloon?

 

 

The real estate market in Greater Toronto Area (GTA) has witnessed a unique trend from the very onset of this year 2015, a spontaneous increase in the resale real estate market. Interestingly it was not sporadic as all the communities in and around GTA has shown an unexpected increase in house prices. The prices increased from minimum 10% to 15% and in some 416 & 905 areas this increase was recorded up to 20%. This has impacted the average price of a house to the same extent. Although analysts and real estate gurus were predicting a surge in the property prices but perhaps they were not even expecting that it could be this much. There’s no doubt that there are so many factors which affects the real estate prices but this increase is beyond common man’s imagination. Everybody is asking the same question, is this price rise is a bubble or is it genuine? I believe in the very beginning it looked like a bubble, which was expected to diffuse over the period of short time, but it didn’t happen and this bubble became a balloon and started hovering all over the GTA and surrounding areas, even the suburbs are enjoying the bounty. Since this balloon of high prices is already having joy ride and don’t look like in the mood or mode of landing. House price soared to its peak as summer temperature increased and this unique phenomenon has never happened in the real estate history of this metropolitan.

Since this price bubble has frozen into an expensive crystal, and has created a panic among the genuine home buyers, especially the first time home buyers, there seems to be no end of bursting it or at least landing on ground. Most of the common buyers are not familiar with the ground realities behind this bubble to balloon kind of trend.

Firstly as Toronto Real Estate Board – TREB has been projecting in its monthly reports, there was a shortfall of newer listings and as compared to previous years there were fewer for sale signs. This has created an automatic competition among potential buyers to pay higher prices. Some of the properties are even selling way more than the asking price. Since according to demand and supply formula its seller’s market due to lack of enough houses for sale, the sellers are listing for more than the market value and amazingly they are getting paid. The bidding war among buyers is another unique trend, which sellers are today grinning at.

Secondly the Canadian home loan interest rates are historic low and it is preventing the price balloon to come down, because the affordability price with the same income is more than before. The generosity of mortgage rates is good for buyers but it’s of no use as well, since they can’t get their dream home due to competitor buyers. It’s expected that the mortgage rates will go up sooner or later and then will we have enough cushioning available to avoid the financial catastrophe?

Home ownership is everyone’s dream and today all the economic factors in Canada are in favor of buyers but one must not forget that home buying is also one of the most important financial decision one takes in a lifetime and it’s a long term financial commitment, your dream home should be a place of creating harmony in your life not a liability. Whether this bubble will burst or the balloon comes down or not, but our urge to own a dream home must not immerse. In order to make an intelligent and informed decision of home buying in this market, I strongly recommend retaining professionals to make your job easy and stress-free.

Happy home buying!

Major Nagra, M.A., M.Ed

Realtor ®, ABR, SRS

Century 21 New Age Realty Inc. Brokerage

5618 Tenth Line W, Unit # 9

Mississauga, Ontario, L5M 7L9

416-997-3000

www.SoldExpert.ca

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Major Nagra

Major Nagra

Sales Representative
CENTURY 21 New Age Realty Inc., Brokerage*
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