Causes for price increase in the real estate market

real estate Toronto

There are several reasons for the price increase in the real estate market.

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Most important and main reason is demand is higher than supply, meaning there are more buyers that sellers, it can happen in any neighborhood and can last a week or a year, in this situation bidding wars happen for the real estate properties and the homes sell over the asking price forcing the market price to go up.

Lower interest rates is another  factor, people tend to purchase more homes when the interest is low, and homes become more affordable to house buyers. This means that high interest rates slow down the market significantly.

Rising builders prices is another major factor. Builders in the past several years tent to sell the homes today at predicted future market prices and in lots of areas up to two hundred thousand dollars higher than a resale value in the neighborhood. This means that when those homes are build the resale price of the whole neighborhood will increase to the price that new homes were sold or even higher.

Wealthy immigration into Canada is another factor. New immigrants from  different countries like China, Iran or India arrive to their new homeland and purchase homes that they see and like in many cases at higher than market value just because they love the home and the location that it is in and they can afford to pay whatever they desire due to their stable and above average financial situation. Most of those buyers do not finance their home and pay cash for them.

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In conclusion, the lower interest rates are, the more wealthy immigration will be coming into Canada, the higher house prices will be. Keep in mind that in some neighborhoods of Greater Toronto Area house prices nearly doubled over the past ten years, and you can find yourself paying over a million dollars for a home that someone purchased for 500 thousand dollars ten years ago. Would a bubble ever burst and prices decrease, no one can give a clear answer or prediction, one thing is for sure, they can increase as steady as they do and did and sky is the limit.


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