Real estate bubble spreads across Canada
Exorbitant prices aren't just in Toronto and Vancouver anymore.
When it comes to ultra-expensive housing in Canada, everyone usually thinks of Toronto or Vancouver. But in recent months, the bubble in the market has become more extensive, and it's already swept across Canada.
For example, in the small town of Perth, Ontario, where fewer than 6,000 people live, a 4-bedroom bungalow recently sold for $679,900 CAD — $150,000 CAD more than the asking price. Typically, such real estate "wars", where buyers are willing to pay extra to get a home, are common in metropolitan areas.
"We were just shocked," says Barb Armstrong, the former owner of the bungalow. — It exceeded all our expectations, we were really shocked.
Barb and her husband were at first unenthusiastic about selling the house, but a realtor they knew told them what was happening in the local real estate market. People from Ottawa and even Toronto are moving to Perth because of the more rustic lifestyle and still relatively affordable prices.
The couple put the bungalow up for sale in mid-March. By the time the ad had 35 hits, they had already received 11 offers to buy.
"Property prices in our city have jumped almost 50%," shared Paul Martin, president of the Perth-based Real Estate Council.
He said half of the buyers are from Ottawa, which is nearly an hour away, and a third are from Toronto, which is about a three-hour drive.
Something similar is happening in another part of Canada, British Columbia. Lars Rees-Hansen sold his house, built in the sixties, last fall and wanted to buy another, more modern but smaller one. Now retired, he is looking at different cities and is willing to compromise, but he can't find anything.
"Most of the houses I want to see are sold before I even make it out the door," Lars says.
Canada's housing market is really overflowing with money right now. In February, the national average real estate price reached a record $678,091 CAD per property. That's a 25% increase over February 2020. Even though the pandemic has brought financial hardship to many, it's driving home sales because that's where Canadians are spending a lot of time right now, and some of them are thinking about working remotely even after the pandemic. Another reason for all this craziness is record low interest rates.
Real estate prices are rising especially fast in smaller communities about an hour's drive from major urban centers. There, housing problems were there even before the pandemic, because the population was growing at the expense of immigrants and foreign students. In Ontario, for example, similar cities saw prices rise 30-40% in February, while the Greater Toronto Area saw prices rise only 14%.
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Another pandemic trend is buying a house without looking. For example, Ean Jackson and his wife Sybille Tinsel, like many other Canadians, sold their Vancouver home to move to a smaller city. The couple ended up settling in the tiny community of Powell River. When they started looking for a house, there were incredibly few offers. And because of restrictions, they couldn't even look at potential housing. So Ean and Sybilla did what millions of other Canadians do: They bought online and hoped for the best.
The realtor sent them a video of the inside and outside of the house. Even though they liked the house, Ean says the purchase was very exciting and the couple doubted their decision until the last moment.
"You save for three or four years, and when you have the right amount, it turns out that the house has doubled in price," Ean says. — But it can't go on like this forever; at some point it has to end.
Current average real estate prices in major Canadian cities can be viewed here.
