Will The Real Estate Market Crash In 2017?

Now that I’ve got your attention – let’s talk about the real estate market!

Especially over the last few years – real estate has become somewhat of a buzz topic. The market conditions have created lots of excitement about the increased value of home prices – but lots of speculation about what will happen next.

Whenever I’m out with friends or at a family gathering, the topic is bound to surface.  I often get calls from those in my network and clients of mine curious about what listings in their neighbourhood sold for.

On the same token, there are lots of speculators out there.  People convinced that the market will crash or that the government will somehow intervene to slow down the growth.

When I talk about real estate investing, lots of people have opinions.  Especially about what will happen to the market and where to invest.  I have a particular friend who I’ve been talking to about this for years.  He is constantly attracted by flashier opportunities south of the border and there are tons of American Guru’s constantly selling ‘get rich quick’ schemes.

Call me a patriot, but look around for a second.  We live in one of the most prosperous, stable and in demand locations in the world.

So market predictions for 2017……based on the research, I would have to say that the market will continue to be strong in 2017, and a crash, well forget about it!

It isn’t about speculation, it is simply a matter of economic fundamentals  So let’s go through why we have reason to believe that our market will continue to be strong through 2017!

Inventory – Plain and simple, there simply isn’t enough.

“Despite a predicted decline in sales activity for 2017, most of Ontario’s housing markets won’t experience price declines this year. That’s because the inventory on single family homes continues to be dramatically low, making it a seller’s market in most of the Greater Toronto and Golden Horseshoe areas.” – MoneySense Magazine

Where is this demand coming from?  And why isn’t there enough supply.

Well for one, immigration.  Canada gets a whopping 300,000 immigrants each year. And guess where the majority of those immigrants settle – you got it, right here in the GTA and Golden Horseshoe areas.

So with more and more people entering an area where land is already scarce, there is no doubt that demand will continue to be strong, hence influencing pricing.

We live in a region where we are locked by Lake Ontario on one side and a massive green belt on the other.  There simply isn’t enough land to feed the supply of population growth.

Interest rates

Of course, interest rates affect the market.  There has been so much talk about affordability and how increased home prices are going to decrease affordability.  But an article by the Globe and Mail urges us to rethink this.

There are two ways that we should look at affordability: first, how much of a down payment is required, and second, how much does it cost to live in an owner-occupied home?

Obviously affordability has worsened (in the past 15 years home prices have increased twice as much as incomes) – The Globe and Mail.  Yes this probably means that it takes longer to save for a downpayment.

But from the perspective of how much it costs to live in an owner occupied home, well, the interest rates are at an all time low (variable mortgages of less than 2.5%).  So even with the rising prices of homes, it is only slightly less affordable to own now than it has been over the last 5-7 years.

And let’s not forget that owning a home is still one of the most lucrative ways to save money, as I talked about last week through mortgage pay down (and yes – great appreciation).  Many savvy Canadians are well aware of this.

This concept helps to explain why, despite all of the negative messaging about affordability, resale activity continues to set records.

This is Canadians calculating what is in their best interest and making the decision to enter the housing market as soon as they possibly can.

So lots to be optimistic about – I think 2017 will continue to be a great year for home owners and real estate investors alike as we ride this crazy market.

So until next time, happy Canadian Real Estate Investing.

Jose Jafferji, REIA