Toronto Real Estate Bubble

15 June 2016
Remax-Condos-Plus

Everyone is talking about real estate bubble in the Toronto real estate market. The trouble is, no one knows what a bubble is. 

The formal definition is three years of double digit price increases. For houses, we've experienced two years in a row. For condos, this is the biggest year yet, but it is only 8%. Previously, we've averaged just 3-5% per year for condos.

Why do experts focus on this? The concern is that incomes will not grow this fast, so no one can afford these higher prices, and those who own will default on their mortgages. Right now we have a shortage of listings for sale. The only way for a price correction is if a lot of properties are dumped on the market. That would be if owners are forced to sell because of mortgage problems. However, did you know that the mortgage arrears number for Ontario is 0.14% -a record low-or less than $3,000 mortgages for the entire province!

Yes, prices will level off when people can not afford these higher prices. No, we are not in a bubble because there will be no price correction, at worst, maybe 5%.