If you don’t own real estate, you could be suffering from a serious case of FOMO right now. In fact, the “fear of missing out” has become a key driver of the housing market across the GTA, and many others in Canada as prices continue to rise, supply is tight and competition is tense, to put it mildly. This is contributing to a frantic pace of sales.
What Happened Over the Past Year?
You’ll agree that 2020 was a one-off year in many ways. It started off strong for real estate, then came the pandemic. During lockdown, some interesting trends emerged. Those employed in the restaurant and entertainment industry were hit hard by business closures and job losses. But many others successfully transitioned to home offices, where they continued to collect paycheques while saving money at an unprecedented rate. With nowhere to go and nothing to do, those savings grew. So too did people’s desire to own property. But not just any property.
The popularity of urban condos faded, while the suburbs gained a new appeal with their larger homes, backyards with pools, and room for a home office. The cherry on the sundae? In most suburban markets, you could buy all that for less than the price and fees of a shoebox condo downtown.
The Fear of Missing Out
The FOMO factor quickly set in, with buyers flocking to small towns surrounding Toronto and well beyond the big-city borders – as far as North Bay and Sudbury, and even giving sleepy Atlantic towns an unprecedented real estate boom. The same trends can be said for Western Canada, with cities in the Prairies seeing notable price gains recently.
As FOMO continues to push prices ever higher in small towns, coupled with high big-city price tags, some experts predict policymakers will likely step in at some point this year, to cool the housing market and bring it back to Earth – because right now, it’s totally out there. What might this look like?
Cooling the Housing Market
Well, the Bank of Canada for one. At the start of the pandemic, the Bank of Canada dropped its benchmark lending rate, and banks and lenders followed suit. Mortgage rates are at a record low, but they have very recently started to creep up, which could be a broader trend that emerges this year.
Another way to cool the market is through policy. The federal government has done this in the past, by way of various taxes and the mortgage stress test. With the hottest housing markets in Canada being little impacted by these moves, smaller markets have not been immune to the effects in the past. However with conditions heating up in small towns, it’s hard to predict what the outcome will be.
With that said, whether you want to get in on the housing market now before prices rise even further, or you need to move for essential reasons, know that real estate has historically been a great long-term investment. Buy if you can, because as we learned in 2020, you never know what’s around the corner.
Looking for guidance? We are here to answer all your real estate questions.