For more than a decade now we have been hearing about an impending crash in the GTA's real estate market. Home prices continue to set record highs, but we keep hearing the nay sayers warning us. Telling us, it can't last, it will come crashing down soon, run for the hills.
The problem is they've been saying that for over a decade now. So I'm writing this opinion based blog, to provide what feedback I can from what I've learned from my 30 years of experience with real estate.
I have spent the majority of my life as a real estate investor and for the last several years as a real estate professional, constantly reading, learning researching and advising buyers, sellers and investors, so I've seen a lot and learned a lot and feel I am able to provide some important feedback in regards to this topic.
Why I Don't Believe There Will be Crash in the Real Estate Market:
1.Current Low Interest Rates-
Interest rates and more importantly mortgage rates are at all time low levels, allowing us to carry larger mortgages and overall more debt, much easier then we did just few years ago.
With rates at these current levels we see that buying a home and carrying a mortgage on a monthly basis costs almost the same price monthly as paying rent on the same home. So instead of renting and accumulating nothing we can buy a home, pay the same money we would for rent into our mortgage and build some equity at the same time, mostly due to the low levels of interest rates even with housing prices at these high levels.
2.Ongoing low interest rates-
The bank of Canada has clearly and openly stated it intends to support the housing market to avoid a crash, in that sector, in addition it has commented how the continued strength in the real estate sector has compensated for some of the weaknesses in other sectors of the Canadian economy. Leading us to beleive that they will continue to keep rates low for a while. In fact they just cut rates sighting the lack of inflation. So Interest are likely to stay at these low levels for a while.
3. Things Are Much different Now Then They Were Before The Last Crash-
Even with these low interest rates, we keep hearing about the similarities between now and the way things were prior to the last real estate crash of the late 80's. Because of the high percentage of our incomes being using for housing related costs(mortgage, utilities, property tax).
Approximately 1/3 of our house hold income according to recent reports, is being for housing costs. This is high, the highest its been in over 20 years, but its still no where near the 50% level we saw prior to the real estate crash of the late 80's. So the household income to housing cost ratio may be high, but is no where near where it was in th elate 80s.
4. Population Growth-
Our population is increasing and projected to continue to do so straight through this decade. Buoyed by immigration, as more families come in they will need homes adding to the current demand for homes, with limited supply available this will add further support to housing prices.
Now there are several other factors I believe that clearly show that these headlines about the "impending real estate crash" are very unlikely, but the above 4 points I believe are the most important reasons why housing will continue to remain strong and even iof there is a slow down, which there every well might be I believe it will only be a small and very unlikely the big crash we've been reading about.