{"id":324,"date":"2017-04-14T00:16:02","date_gmt":"2017-04-14T00:16:02","guid":{"rendered":"https:\/\/www.realestateleads.ca\/blog\/?p=324"},"modified":"2023-09-27T14:42:51","modified_gmt":"2023-09-27T14:42:51","slug":"hard-to-argue-against-concerns-over-vancouver-toronto-market-outlooks","status":"publish","type":"post","link":"https:\/\/www.realestateleads.ca\/blog\/hard-to-argue-against-concerns-over-vancouver-toronto-market-outlooks\/","title":{"rendered":"Hard to Argue Against Concerns Over Vancouver \/ Toronto Market Outlooks"},"content":{"rendered":"
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\"Canada<\/a>There\u2019s been a whole host of different opinions on the state of the markets in Canada\u2019s 2 biggest cities, and ones where – not surprisingly – there\u2019s the most demand for housing and the ever-increasing development of \u2018bubbles\u2019 of the same variety that proved to be the start of a major detrimental turn events in the USA nearly 10 years ago now. Here at Real Estate Leads<\/a>, we have endless tips for realtors but we\u2019re not exactly experts on the connection between the economy and housing investment in Canada<\/p>\n

There was a recent interview with someone who most definitely has the credential to say he is an expert. Royal Bank of Canada CEO Dave McKay was one that didn\u2019t see things as rosy (or perhaps \u2018rosier\u2019 would be more accurate) as others do, and considering he\u2019s the head of a major financial lending institution you can imagine he\u2019s got his thumb on the pulse of all this in a way most of us couldn\u2019t even begin to.<\/p>\n

An Unhealthy Combination<\/strong><\/h3>\n

McKay attributed the rapid increase in housing prices in the two cities to an “unhealthy combination of factors\u201d and went on further to cite an imbalance in supply and demand for residential properties, low interest rates, and speculative activity.<\/p>\n

“All of these factors are mixing to push prices up to unsustainable levels, stressing household balance sheets and locking many people out of the housing market,” McKay remarked at the bank’s annual general meeting in Toronto on Thursday.<\/p>\n

“More and more disposable income is going towards servicing those houses,” he said, adding further \u201d and more capital is getting invested in those homes. And the real risk for us as an economy is the long-term drag that has on the rest of the economy as so much of a person’s net worth and cash flow goes into servicing their home.\u201d<\/p>\n

As stated, this kind of precarious arrangement was a big part of what preceded and initiated the crash in the US in 2008, and the concern of course is that something similar could happen here.<\/p>\n

More of the Up, Up, Up<\/strong><\/h3>\n

McKay offered his observations a day after the latest data from the Toronto Real Estate Board showed the average price of a home in the Greater Toronto Area increased by 33% over the last 12 months concluding at the close of March 2017.<\/p>\n

What\u2019s come as a result is a whole array of responses about what can be done to rein in housing costs in the city, which are now spilling over to the rental market via exorbitant rent increases. After all, the operating principles of supply and demand never really change.<\/p>\n

What\u2019s Up Out West<\/strong><\/h3>\n

While it is true that price increases in Vancouver have cooled off, Lotus Land has also seen runaway double-digit gains, month after month after month, until the implementation of a 15% tax on foreign buyers last year.<\/p>\n

McKay believes one single solution being applied to the entirety of these problems is unlikely to be successful.<\/p>\n

He said interventions from federal, provincial, and local governments to come up with a more nuanced solution to a very complex problem would have much more propriety.<\/p>\n

“We would welcome any effort by the three levels of government to coordinate their interventions, and to do so reasonably quickly,” he said.<\/p>\n

“But longer-term, I believe all parties need to come together \u2014 governments; developers; realtors; banks; community groups and others \u2014 to accelerate our progress in finding policies and solutions for this issue.\u201d<\/p>\n

2 Further Sobering Statistic Comparisons<\/strong><\/h3>\n

In bearing out a good portion of what MacKay has alluded to, have a look at these 2 charts indicating average home prices in both these cities in comparison to others, along with what is required for a down payment on that home.<\/p>\n

Purchase prices<\/p>\n