Real estate prices in Canada, namely in Toronto and Vancouver, have been drastically increasing for the past several years. Prices have got so high that a lot of residents simply cannot afford to purchase a home in these big cities, which is becoming a problem. Some claim that this real estate “bubble” will pop very soon, but no one knows for sure when that will happen.

A lot of people attribute the rising prices of real estate to the large increase in foreign investment. Foreign investors are looking for places to invest their money where they can earn a sizeable return. In some other countries, the economy is not very stable so investing in Canadian real estate is one of the smartest investments for them. Additionally, some places, like in China for instance, have real estate prices that are even higher than in Canada so it gives them a more affordable investment opportunity. The exact extent to which this foreign investment is increasing real estate prices is unknown but it certainly has had an effect.

Foreign investment is something that has always been prevalent in the Canadian economy; however there is more to the story in today’s market. The problem is that these foreign investors are not living in these homes, so not only is it causing the prices to increase, but they are not even giving residents the opportunity to rent their homes. These homes are, for the most part, vacant, which is affecting the supply. The lack of supply is forcing buyers to expand their geographical search area. Buyers looking in Toronto, for example, may be influenced into looking at houses for sale in Brampton

Vancouver recently imposed a vacant home tax to penalize speculators, due to the pressure put on the governments of various levels to try to cool the real estate market. John Tory says he is willing to explore this potential solution to see if it could be what Toronto desperately needs at this time. Investors who purchase these homes with no intention of actually living in them really hurts the market. Renters could really benefit from these homes being available for lease, but instead they have a shortage of houses for rent. A report released by RBC Economics outlines the fact that house prices haven’t been this unaffordable for residents since 1990, which was right before the market crashed. Many see a vacancy tax as the only solution to keep the market in check, but it is still unclear what the result would be. In any case, something must be done to solve this problem, and it must be done soon, before it gets even worse than it already is.

The average price of a detached single-family home has surpassed $1,500,000 which is absurd. You would be hard pressed to find a listing for a single-family detached home for less than $1,000,000 in the Toronto area on real estate sites such as ullow. A large number of these homes are in such bad shape that they need to be torn down. Additionally, the lot size is so small but these investments are gold mines, and that is why there are so many foreign investors looking to get a piece of them.

While there is little reliable data to support exactly how many empty units there are in Toronto that are owned by speculators, it is clear that the number is far too high. Estimates have the number higher than 50,000 units, but that number cannot be verified. What we do know, is that something must be done before it spirals out of control.

About The Author