The GTA housing market has been heating up for the last few months. Even Brampton house prices have risen by thousands of dollars. This kind of craziness is unprecedented for the time I have been in the Real Estate profession.
Not only have the prices gone up unrealistically, but the buyers, and even the realtors who represent them, are feeling helpless to explain the maximum price that is prudent for them to keep bidding. The Comparative Market evaluations which Realtors make ultimately lose its significance in the real battle ground of house bidding. In some instances, when sellers prefer not to bid face to face, they choose to communicate with only the 2 highest offers. This has become a very challenging task for the buyer’s representative. How to guess how much an unknown person can offer for that house is the biggest test. Moreover, inventory of houses for sale is not increasing. This demand and supply situation is driving house prices to an even higher level every day. When the buyers get tired of submitting offers, they tend to buy the next house at a higher price, which is leading to insane increase in prices.
Another fallout concerning high bidding price offers are the complications that arise when trying to prove to financial institutions that the actual value of the house is not less than the price it was sold at after bidding, for the purpose of mortgage approval. The bank appraiser may not appraise the house at the price at which your offer was accepted. This may lead to the bank possibly asking you to pay for that portion from your own pocket. On the other hand, you may have to arrange for a second mortgage at higher interest rate.
The developments happening around the globe at this point of time do not point towards an increase in the rate of interests to a very high level in a few years. The majority of buyers still look at the present monthly payments that they will have to make.
Since the prices of houses in the Toronto area have rose beyond affordable limits for many buyers, many of them have settled to buy houses in areas like Brampton, where prices were still reasonable for now. This has resulted in an overall price burst in the GTA area.
The government must invest more in creating infrastructures so that people are able to buy cheaper and affordable houses outside the GTA and commute quickly and easily even to downtown Toronto. This is the only way to help reduce the pressure of rising prices for detached, semi-detached and townhomes in the GTA. Luckily, it can be noticed that more condominiums are indeed being built in the GTA area, that can provide accommodations for individuals and small families.
In conclusion, if prices continue to rise at this rate, it can lead to a risk of “bubble trouble” – the high tension of the situation “popping” the bubble, and making matters worse. Ontario’s economy may be expanding and growing at present, however, it is not at a rate that will create additional cash flow and increase home income to a point that can meet the increase in the cost of housing. The Ontario government is trying to make housing prices more affordable, but only time will tell if their efforts will have a cooling affect on the situation.

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Jagpreet Puri is a Registered Canadian Immigration Consultant (RCIC) and Real Estate Consultant and is working with a Commercial Brokerage in Ontario