Housing affordability is at crisis proportions across the country
I had a conversation with my father recently about the real estate market. He firmly believes a correction is coming; that this current inflated market won’t last. He likens it to the 80s and early 90s when real estate went wild and then eventually crashed, along with the rest of the economy.
I wasn’t involved in real estate back then, but I do know there were a lot of other market factors influencing things – sky-high interest rates, immigration and investment speculation, among other things. A housing bubble peaked at the end of the 80s and then burst.
There was talk of another bubble bursting back in the mid-2010s. It didn’t happen. And now we’re in the middle of a pandemic and, while early on it looked like prices were falling, 2021 is proving different. So, while my father thinks a correction is coming, I’m not really seeing any signs of one.
The pandemic, coupled with the high cost of housing in the GTA, is sending many people to Waterloo Region, with sales hitting a new milestone in January. And with high demand comes higher prices. I’ve had a few frustrated buyers outbid on homes, with many sellers now dealing with multiple offers and getting thousands (and sometimes hundreds of thousands) above asking.
While sellers are reaping the rewards of this increased demand, what does this mean for the average buyer? Has this become a sport that only the wealthy can play? A Kitchener housing report in January 2020 indicated that only a third of its residents could afford to purchase an average resale home in the city. Further stating that “home ownership is becoming unaffordable for all but the city’s highest earners”.
Buyers from the GTA are swallowing up homes in the Waterloo Region which is spearheading demand. They are now working from home, or willing to commute. Looking for the small city lifestyle, backyards, and a slower pace; they are settling in. Will that force our residents to also move further from the city, commuting an hour to work into the Waterloo Region?
We are starting to see some creative solutions to our affordable housing crisis – which is happening across the country. Millennials are a creative bunch and one of the generations most affected by this crisis. As a result, we are starting to see a growing trend in creative housing solutions like co-living and shared housing.
Co-living brings people together in a shared living space. Each resident has their own private unit, but share common areas, including lounges, workout rooms, and entertainment areas. Key Living in Toronto offers such a product and their website cites “own real estate, not a mortgage”. In fact, one such company – Node – is setting up a co-living space in Kitchener.
Creative solutions aside, home ownership is a big issue. It’s a dream that most Canadians have, but it has become increasingly difficult to achieve. And it’s not only due to rising prices – incomes have not increased at the same rate as housing and changes to mortgage rules have made it harder to qualify for one.
This has increased the demand for rentals, which in turn has increased rental prices. Read this article to find out about the Kitchener rental market. The result? An increase in the need for subsidized and affordable housing.
Will this market continue? The Bank of Canada recently warned of some early signs of ‘excess exuberance’ in the housing market, but with interest rates remaining low, demand will remain for now. The long-term outlook is anyone’s guess.
So my question is, while I believe that home ownership is a privilege, is it becoming a privilege only for the rich?