You might have thought real estate is expensive in Canada, even if you are a tenant or a buyer, but no one expected it would become more expensive during the COVID-19 pandemic. Only those with advanced understandings of how quantitative easing impacts housing would have expected it.
Today, Toronto and Vancouver’s house prices are detached from local incomes, demonstrating the fact that underlying economic reasons are not the cause of housing prices. There is less immigration, so there should be less demand, right? Not in Canada. Businesses are closing every day — that should also mean less entrepreneurs making money.
The Bank of Canada is purchasing $3 billion in mortgage bonds each week, with the intention of stimulating the real estate market. And now Canadian MP Adam Vaughan has made a serious slip of the tongue on Steve Paikin’s “The National” program. Vaughan admits that the market is designed for foreign investors, and doesn’t meet the needs of Canadians.
In Toronto, prices must remain static for 19 years and income levels must increase five percent a year before the prices equal income affordability. The Bank of Canada has a message for the next generation, who now have to pick up the pieces left by the global pandemic: keep working hard, but don’t expect to own a house, even a townhouse.