Rising Property Prices

A regular question these days is “How is it that property prices continue to rise”?
The answer is multi-facetted and is based on several factors:
INTEREST RATES
The Bank of Canada has continued to lower interest rates and thus reduced mortgage carrying costs. This of course makes it possible to carry larger amounts and is attractive to those in need of more space or bigger properties.
GOVERNMENT MEASURES
The new money injected into the economy by both the Government and Bank of Canada by way of bonds, CERB, payroll programs, business loans etc. has also contributed to increased real estate activity.
IMMIGRATION
Over the years, Canada has attracted those seeking to invest in real estate. New immigrants, once Canadian landed immigrant status is gained, start investing in real estate. This includes international students (with financial stability) who chose to stay in Canada after completing their studies.
POPULATION GROWTH
With growth in population comes demand for housing and for over a decade, we have seen a shortfall of over 10,000 housing units per year, in the Greater Toronto Area alone. With less supply comes greater demand and greater demand allows for increased prices.
PANDEMIC EFFECTS
Having had to to work/stay at home for almost a year now, many Canadians are open to the idea of different living arrangements. Properties with home office potential or leaving the traditional business hubs and downtown areas have suddenly become very viable alternatives.
Additionally, those who were able to successfully pivot from an office working environment to working from home without any negative effect on their income, have forged ahead with their pre-pandemic real estate investment strategies.
These changes in housing preferences, reduced interest rates, government funding initiatives, higher demand, the surplus of motivated buyers coupled with a lack of supply continue to attribute to the higher housing prices.

It is difficult to foresee how long this trend will continue. My sense, at least for now, is that unless income levels increase, at some point, Canadians will not be able to qualify for the ever-increasing mortgage amounts. That said, depending on future government responses (extended amortization periods and even lower interest rates), the real estate market will continue to be an exciting and compelling business.