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Is it a Bubble or Not?

Posted February 26th, 2021 under market updates.

Is the real estate market in a bubble? We’ve heard this question several times over the past few years, and each time prices continued to soar even higher.

Now, however, no less than the Governor of the Bank of Canada has warned that the housing market may turn into a speculative buying frenzy—much like the one that resulted from the fast-paced price rises caused by bidding war in 2016 and 2017.

Speaking recently to the Calgary and Edmonton chambers of commerce (as reported February 24th by CBC News), Tiff Macklem warned that “[w]hen we see people starting to buy houses solely because they think prices are going to go up, that is a warning sign for us ... We are starting to see some early signs of excess exuberance.”

Despite the fact that new mortgage stress-tests and tax rules were put into place to cool off buying, the upward price trend was never successfully curbed.

Macklem suggested that some people are moving out of the city centre now that they can work from home, while properties in the city centre are receiving less interest. This would explain price rises in Brampton, where newer developments feature large homes.

When you see warning signs like this, it’s best to put your thinking cap on. If you’re considering downsizing, don’t wait, as today’s wide price differences may not last. Meanwhile, if you were thinking of buying a property for investment, you may be best to think again.

Want to know more about the real estate bubble and how it might affect you? Just ask me, I'll be happy to help.


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