A pandemic-fuelled housing market
The surging demand for housing can be traced back to multiple factors. As Pollock noted, a host of factors related to the pandemic have disrupted people’s spending habits. For many, particularly those who have been able to maintain their income or benefit substantially from government-provided support, that’s resulted in higher savings. The wider adoption of work-from-home setups, he added, has led to a much greater appreciation for expansive living spaces and the great outdoors.
“I do think the low interest rates are also fuelling some of this,” Pollock added. “A lot of clients are thinking, ‘Interest rates are reasonable – the money is almost free. So let’s invest.’ And I think that captures what’s happening.”
With so much demand spilling in, Canada’s real estate space has largely become a seller’s market. Beyond that, it has turned into an auctions market, where multiple interested buyers may bid prices up by hundreds of thousands of dollars above asking as they compete for a single cottage property.
“Homebuyers are borrowing significant sums of money to fund these purchases,” Pollock said. “If they’re not locking in their mortgages, it’s going to be challenging for some Canadians when rates go back up and it’s time for them to renew.”
Recently, the Office of the Superintendent of Financial Institutions stepped up its mortgage stress test by raising the qualifying rate for uninsured mortgages. The intent is to cool the housing market and ensure that borrowers will be more able to withstand a rise in interest rates. But according to Pollock, some Canadians are finding ways around those safeguards.
