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Toronto's Real Estate Market Is Not In A 'Bubble' & It Might Not Cool Off For A While

Hate to burst prospective homeowners' bubble but...

To all of the prospective homeowners who were waiting to buy in Toronto in hopes that the real estate market "bubble" would soon burst, you may be waiting for quite a while.

A Re/Max article posted on February 8 breaks down Bank of Canada's House Price Exuberance Index Indicator for 2021's third quarter and what exactly it means for Toronto's housing market.

In order for a market to create a "bubble", it needs to appear in the index's "yellow zone." Before the pandemic, Toronto's housing market was in the red zone, which meant it was an "exuberant market," but based on the Bank of Canada's recent index, it didn't make the cut.

"In March 2021, national resales reached all-time highs and house price growth surpassed its previous peak," Bank of Canada officials wrote, and added strong demand, the desire for more space, and limited supply have scaled prices upwards.

"Sustained periods of rapid growth in house prices can create the expectation that prices will continue to rise, even if economic fundamentals cannot support these increases."

Re/Max notes that this index may not be a total representation of Canada's real estate market, they do point out that Toronto's housing market is still not going to slow down anytime soon.

Based on the Toronto Regional Real Estate Board's record of 2021, residential property sales soared by 28% in 2021, which bumped up the average selling price from $929,636 to $1.095 million.

Re/Max notes Canada's real estate market will be an "interesting time" as interest rates inflation prices will continue to rise, and it could be more difficult to get a mortgage, too.

Might want to rain-check on buying that dream home for now.