A buying frenzy is reemerging in Canada after one of the steepest housing price declines in the nation’s history.
In Toronto, properties are selling the day they hit the market. In Vancouver, lines for open houses are stretching down the block. Homes are now once again selling for hundreds of thousands of dollars over asking.Despite what was a nearly 16 per cent drop in home prices over 11 months, Canadian housing is the least affordable it’s been in more than four decades, according to Oxford Economics.
Though there is no current data on the extent of financial help homebuyers are receiving, research from Canadian Imperial Bank of Commerce in late 2021 showed 30 per cent of first-time buyers were, with the average gift rising along with home prices to $82,000. By 2019, the baby boomer generation already had an average net worth of $1.2 million, according to Statistics Canada data. And that would have swelled thanks to the pandemic surge in home values, which last year’s decline has not entirely erased. Meanwhile, their buying power has been insulated from the near doubling of interest rates over the last year because many already paid off their mortgages.
With prices on the rise again — the benchmark price of a home in Canada rose 1.6 per cent in April — the question is what happens to the people whose families don’t have home equity to tap into? Canadian banks generally won’t lend more than five times a borrowers’ income, but home prices in the country are about seven times the average, according to a January report from the Bank of Nova Scotia.
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