It has been common knowledge that the real estate market in the U.S. has been risky for quite some time. However, with lower home prices and less household debt, the U.S. market has actually been getting less risky in the past few months and years. But now, the Canadian real estate market may well be replacing the U.S. market, as it has become significantly riskier. That could have a significant impact on buyers, sellers, and homeowners all over the country. Take a look at the factors that are making the Canadian market riskier than ever.
It’s important to note that these changes to the Canadian real estate market have been clustered in a few particular areas, and it’s not hard to guess which ones they are. Yes — both Toronto and Vancouver real estate are currently overvalued in the Canadian real estate market. This is unsurprising, as these are some of the most desirable cities to live in all of Canada. These changes are largely due to an influx in foreign buyers in these cities, and experts are expressing concern that these changes are very similar to what happened in the U.S. markets during the 2008 housing crash.
However, there are some main differences that separate what’s happening in the Canadian real estate market from what happened in the U.S. Namely, more mortgage regulations from the government and more taxes for foreign buyers are keeping this situation from escalating to the same level as was seen in the U.S. during that time.
It’s no secret that foreign buyers are having an effect on the Canadian real estate market. These buyers are attracted to homes in big cities in Canada because they see them as an investment. However, that can have a negative effect on people who actually live in these cities, as many foreign buyers do not actually inhabit the homes they buy in Canada. This kind of buying drives up home prices for everyone, which can be a huge burden to those trying to make ends meet.
Traditionally, it’s Vancouver that has a reputation for attracting these foreign buyers. However, experts are now finding that within the Canadian real estate market, Calgary has been more destabilized by foreign buyers than Vancouver. This could be related to the oil industry in Alberta.
Solutions to the Problem
Officials in the Canadian real estate market are working hard to ensure that Canada doesn’t run into the same housing problems as the U.S. encountered a decade ago. One of the most effective ways that experts are looking to level the playing field is by imposing significant taxes on foreign buyers. In 2018, the tax rate for foreign buyers was raised from 15 percent to 20 percent. They are hoping that this will solve some of the problems with overvaluation.
Whether you are looking to buy or sell a home in the Canadian real estate market, it pays to have a knowledgeable realtor on your side that is keeping up with all the current changes to the market.