Real estate prices have soared in Canada, with the average price of a home costing 25 per cent more than last year.
Toronto-based financial expert Preet Banerjee says people with “pandemic savings” are one of the reasons we’re seeing a buying frenzy.
“There’s a lot of people who are working from home who haven’t lost their income but have lost the ability to spend a lot of money on travel and entertainment,” he says. Banerjee adds that their savings accounts might now be geared towards homeownership.
Other reasons for the increase in prices can be attributed to cheap credit, the fear of missing out and the “work from home effect,” Banerjee says; people who are working from home are willing to invest more into their homes.
“That includes buying more, bidding more for houses and maybe starting some home renovation projects,” he adds.
In larger cities like Toronto and Vancouver, Banerjee says the hope of buying a home for young adults has diminished.
“This has been an affordability crisis.”
If you’re unsure if now is the time to buy, Banerjee recommends asking yourself: How much of your lifestyle are you willing to sacrifice?
“(If) you spend a lot of your income on just putting a roof over your head, what money do you have leftover to live your life,” he says, “or to have a buffer with your finances in case anything goes wrong?”
Many economists and analysts are calling this current situation a housing bubble and recent homeowners fear it might burst soon.
“The people who are really at risk are the people who bought in the last little while, say a year to two years,” Banerjee says.
These people are at risk of owing more money than what their home is worth if prices drop back down, he adds.
If you do fit into this group, Banerjee recommends tuning out the noise and just focusing on the long-term.
“Over time, that value will eventually come back up,” he says.
For more information on Canada’s current housing boom, watch the full video above.