At this time of year, people in Southern Ontario usually talk — ad nauseum — about the weather. This year, it’s real estate prices.
In a village store 90 minutes east of Toronto yesterday afternoon, a woman mentioned a small house in her neighborhood whose price had almost doubled in recent years.
“It’s unbelievable, what’s happening,” she said.
The house recently sold, after a bidding war, for $100,000 more than the asking price.
House prices in the Toronto area are crazy. And there’s a huge downside.
The prices of some homes have increased by a third in the last year alone.
It’s affecting the rental market too. Last week, I read that some Toronto landlords have nearly doubled their rents.
So I wonder: where’s the average person supposed to live?
Many families and single people are moving away — up to a couple hours’ drive away from their work — for affordable housing.
But that’s having an impact too. House prices were a lot lower in regions east, west and north of the city just a couple years ago. But the newcomers’ arrival in those regions has pushed up prices there too.
Last evening, at a small gathering roughly 2 hours from Toronto, the host seemed to still be in shock when he told visitors that two houses in the nearby village had recently sold for more than a million dollars. A few years ago, they would have been around $600, 000.
Foreign speculators, investing in Toronto’s real estate, were blamed for causing the huge increases. There oughta be a law, some people said. The government, fearing a real estate crash, now requires house buyers to have a 20% downpayment – or pay for very costly mortgage insurance.
If you’re well-off, that’s not a problem. But for first-time buyers, 20% is $140-thousand downpayment on a $700,000 dwelling… if you can find one.
No-one’s yet instituted a law against bidding wars. These fierce competitions bring an intense ‘auction fever’ to every house sale — the kind of panic that leads to foolish decisions. Many families today, after paying their mortgages, are barely making ends meet.
And now there are bidding wars in the rental market too.
So who benefits from these out-of-control price increases? Well, some sectors do.
- Sellers moving out of the region to a more affordable community.
- Realtors, whose percentage (5 or 6%) is usually fixed. That means huge increases for them when house prices explode.
- Some landlords.
- And government, through taxes.
But if you’re an average-income, would-be buyer (or renter), you’re scrood.
There outghta be a law.