Prices to continue growing as more homes become investments - analysis

Despite calls from various quarters for the federal government to step in and decisively intervene in the worsening affordability crisis plaguing Canada’s hottest housing markets, such a step remains unlikely as more and more properties are becoming investments.
 
“[There] are increasing signs that the smart money from around the world and from right here at home thinks that in the current climate, real estate remains a good investment. And as long as that is so, house prices will stay strong,” long-time market observer Don Pittis stated in a July 4 analysis piece for CBC News.
 
With housing starts in Vancouver reaching a 25-year record high in February, global economic forces would ensure that any government steps in the vein of currently existing and proposed measures would not be effective in stopping the price spikes in Canadian real estate, Pittis argued.
 
“In fact, a new flood of money into the global economy from central banks in an attempt to counteract the depressing effect of the Brexit vote only makes putting cash into real estate a sounder financial investment,” the analyst wrote.
 
Pittis explained that in comparison to other investments, the sheer physical presence of homes assures owners that they can lean onto something come the hard times.
 
“Everywhere in the world, people with money are trying to turn it into something real,” Pittis said. “It has made real estate prices rise despite rents that are not keeping pace.”
 
“Unlike other assets like gold, houses have a real value. They offer protection from the weather. They offer comfort and prestige.”
 
And despite long-running fears of a bubble popping, such scenarios remain speculative—and the most enterprising would-be buyers and investors would not be deterred by these assumptions.
 
“Many people have warned that low rates are creating problems in our financial markets and even in our society — including real estate prices unrelated to incomes — and eventually something is going to break,” Pittis said. “So far that has not happened.”
 
“[Until] something significant changes in the global economy, or until the government takes some action to make housing a bad financial investment, money will likely continue to find its way into property, and prices will rise.”

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