A respected Toronto-based Realtor says the Canadian housing market is not overvalued, despite a report from TD Bank that claimed prices are 10 per cent higher than they should be.
“I don’t think it’s over-valued globally at all,” Guy Yarkoni told CREW Tuesday. “The market is just shifting again. It’s a waiting game, but we’ve come to a strong spring and I’ve already noticed more multiple offers than last year.”
Lisa Reikman, chief risk officer of Canadian banking at Toronto-Dominion Bank, told the Financial Post that the biggest risks in the Canadian housing market include condominium overbuilding and uncertainty over how many investors are buying. While a spike in interest rates or unemployment could threaten Canada’s robust housing market, she said, the risk is fairly low.
Yarkoni, meanwhile, says it’s simple math that has driven up the price of homes.
“There is a strong demand, and there’s not enough property on the market for that demand,” he says. “That tends to build the demand, so we get more multiple offers and a higher purchase price.”
However, Reikman said TD and other banks will be closely watching the growing number of condos and whether or not those units are being used as a residence or as an investment property.
Yarkoni says that he has certainly noticed more investors purchasing condo units.
“A lot of my clients are investors, but I can’t speak for the whole market,” he says. “There is definitely a growth in the Canadian market that sees real estate as an investment.
“Plus investors globally are coming to Toronto and that does have an effect on price. For them this market seems cheaper than it is.”
As for the threat of an over-saturated condo market, Yarkoni says he doesn’t see a problem with the number of condos buildings.
“[Condos] are being built because there’s a demand for them,” he says. “I don’t think we’re at a point where we’ve overbuilt.”
Still, several factors will likely prevent a U.S.-style market collapse, Reikman told the Post, including conservative underwriting standards, a small subprime market, the requirement that mortgages with less than 80 per cent loan-to-value be insured and the tendency of Canadian lenders to keep mortgages on their books.
“We look at all of those things and think there are some pretty fundamental reasons why the U.S.-style collapse can’t happen here or is highly unlikely to happen here,” she said.
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