The epidemic is affecting real estate markets around the world in a variety of ways. Although fear of job loss in the first few months postpones home buying decisions, in most parts of the world this situation has already been overcome by high demand with low interest rates.
According to data released by the Federal Reserve Bank of Dallas, the global housing price index rose 10.6% last year.
Canada ranks next to New Zealand on a global scale, the largest increase in the entire United States. While the average price of a home in these two countries has risen by more than 20% in the past year, Spain and Italy have fallen by 1.7% and 0.2%, respectively, indicating that there is still inequality between the countries and their ways. People are reacting to this new stage of the epidemic.
In the particular case of Canada, the value of the residential real estate market is slightly higher than 10% of its GDP, while in the United States it is only 5%. For this reason, on the streets, and among some analysts, the country is experiencing the largest mortgage bubble in its history, triggered by the low interest rates offered by banks today.
“The fire is still burning. Demand is still high due to low mortgage rates,” said Robert Kawsik, a senior economist at BMO.
This situation of cheap loans has a high cash flow, which is explained by various factors such as the transfer of capital from child boomers to their descendants, the migration of foreign investors and the sale of apartments in urban centers to buy large assets. Areas inhabited by people. For all these reasons Canada has become the most expensive home buying country in the United States today. On average, a property in this part of the world costs US $ 611,000, while in the United States that value is US $ 375,000.
These figures are confirmed by the Organization for Economic Co-operation and Development (OECD). Their studies show that Canada today has the worst housing index in the G7 and G20. This measure, which is calculated by dividing the nominal home price index by personal disposable income, is 135% and the OECD average is 119%.
If this criterion is high, it can be very difficult for families to purchase a property.
Against this backdrop, some sectors have begun to put pressure on the central bank to raise interest rates, thus restricting the rising cost of living, which is at its highest level in the last two decades today. “Our future orientation is clear that we will not raise interest rates until the recession is over. We are not there yet, but we’re getting closer,” Bank of Canada Governor Tiff McClem said recently.
Over the past three months, the average home price in Toronto has surpassed $ 1 million, rising to over $ 80,000. As the central bank looks forward to the deadline for interest rate hikes, homebuyers may find new impetus to move faster, so this pace is expected to continue until the hike takes effect.
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