CANADIAN REAL ESTATE MARKET IS ON A MELT-UP

March 24, 2021

CANADIAN REAL ESTATE ON A MELT-UP

With the increase in demand that COVID has created, banks are now claiming that Canada’s real estate is in a melt-up, says BMO economist Robert Kavcic.

A “melt-up” is when prices do not show sustainable price growth and are based on exuberance.

When this happened in 2017, there were measures in place on how to fix this “melt-up” and now the Canadian housing market is left without those measures. It has also been stated that there’s been no discussion on bringing any sort of aid to help “cool off” the market.

Bidding wars are more constant now, and people are living in this FOMO state of mind when it comes to purchasing their properties. Sellers will benefit today, the ones in the future will not. The lack of exchangeability will cause lower prices, especially with a pent-up supply side.

There is no length determined for this melt-up since it differs from one to the other, but this is now being put side to side with the biggest melt-ups in Canada: the melt-up of 1929, and the melt-up of 1999.

How do you feel about this “melt-up”. Do you think this is all in benefits of an industry, or will this backfire in the future?