“Is it sustainable? Absolutely not. You’re compounding at a rate of 15-17% and that growth rate won’t continue. So we’re not going to continue that growth rate, that’s for sure,” Economist Micahel Campbell said. “Should something be done? Nothing can be done without consequences. For example, the Conference Board of Canada yet again confirmed BC will lead the country in growth. Last year, the country created 144,000 new jobs, BC had 110,000 of them.”
And many of those jobs are the result of the booming construction industry.
Vancouver sales increased 18% year-over-year in in April and prices skyrocketed 30% year-over-year.
And things got even hotter in May.
“Last month's sales were 35.3 percent above the 10-year sales average for May and ranks as the highest sales total on record for that month. While demand is very hot, the total number of listings in Metro Vancouver has declined 37.3 per cent from a year ago, helping to explain some of the upward pressure on price,” Dr. Sherry Cooper, chief economist with Dominion Lending Centres, said. “Home prices in Greater Vancouver are up a stunning 48.3 per cent in the past three years and the one-year change has been close to 30 per cent. The numbers are similar for the Lower Mainland as a whole. The price gains are even larger for single-family detached homes as supply is very limited.”
Any measures by the government to curtail home price gains in Canada’s two hottest markets would negatively impact investors. But they could also impact millions of others.
“A lot of people on the retirement side of things need their homes to sell at these prices because what they’re in return due to record-low interest rates is so much less than when they started planning for retirement, so they need a much higher asset level,” Campbell said. “That’s a group that actually needs these prices.”
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It isn’t just investors who would be negatively impacted by measures to cool the housing market, according to one leading economist.