Hello everyone, today let's talk about Canada, especially the current state of Toronto's housing prices, and some of my personal views on future housing prices. Recently, a very strange phenomenon has appeared in the Toronto real estate market - a large number of houses are flooding the market, but no one is interested, and the transaction volume is very dismal.
Some time ago, I noticed that the transaction volume in several communities around me suddenly increased, and I even made a video to share with you. But the good times didn't last long, and recently it has returned to its previous coldness, with a large number of listings but few transactions.
The previous increase in transaction volume, I guessed, might be because of the school season. Many parents need to buy properties near the school for their children to attend school, and they need a fixed address to enroll. At that time, I predicted that the transaction volume would fall back in July and August, but I didn't expect it to come true so quickly.
Now, the Toronto real estate market is showing a clear situation of supply exceeding demand. Why is this?
I think the main reason is that it is already difficult for local people's income to maintain a basic standard of living. Where else is there extra money to buy a house? To put it bluntly, everyone can't afford a house! The current housing prices are far beyond the affordability of local residents.
Although there are many houses for sale on the market, the price drop is very small. Data shows that the average house price in the Toronto area in May this year fell by only 4% compared to the same period last year, from CAD 1.16 million to CAD 1.12 million.
This little drop has almost no impact on ordinary families. A house price of CAD 1.12 million is still unaffordable. If the down payment is 20%, you still need to borrow nearly CAD 1 million, which means that the family's annual income needs to reach CAD 200,000 to afford it. But the reality is that in Toronto, it is estimated that only about 10% of the total population has a family annual income of CAD 200,000.
So, the most fundamental reason why many people in Toronto can't afford a house is not that there are too few houses. Even if you increase the supply and desperately build houses, people still can't afford it. The key to solving the problem is either a drop in housing prices or a rise in wages. The current situation is that wages are too low and consumption is too high, making it extremely difficult to buy a house.
Some people even took out loans in the low-interest-rate era. Now that interest rates have risen, they can barely breathe just by paying the mortgage every month, and they have no choice but to sell their houses. The previous mortgage may have been CAD 4,000, but now it has suddenly risen to CAD 7,000 or 8,000, which is simply impossible to live on!
Interest rates do have a big impact on housing prices and transaction volume. If interest rates could return to the previous ultra-low levels, such as 1%, the monthly mortgage pressure would be much less, and the real estate market might be a completely different scene. But in the short term, it is unlikely that interest rates will fall to that level.
On the one hand, it is necessary to control inflation; on the other hand, if the Bank of Canada cuts interest rates by more than the United States, it may face many problems. Therefore, it can only follow the United States, but the United States is not cutting interest rates now, so it can only hold on.
I think it will be difficult to return to the previous low-interest-rate era for mortgages in the next two or three years, unless there is a financial crisis. When a financial crisis breaks out, housing prices and interest rates will fall, which is good news for people who want to buy a house. But the premise is that you have to keep your job in the financial crisis. After all, the reason for the fall in housing prices is often because many people lose their jobs and have to sell their houses.
So, for most ordinary people, they may still not be able to afford a house. I feel like everyone is a "beast of burden" calculated by the system, and it is always difficult to escape this vicious circle. Unless you make the right choices at key moments in your life, double your assets, and enjoy the dividends of the times.
Which choices are considered correct? For example, buying a house 20 years ago, buying a house 10 years ago. 10 years ago, if you were bolder, you would buy a few more houses; 20 years ago, even if it was difficult to buy a house, you still gritted your teeth and bought it. Or, 20 years ago, you could have borrowed 100% to buy a 3,000-square-foot house, but for the sake of stability, you only bought a condo. Then now, your assets and life trajectory may be completely different. The price difference between a 3,000-square-foot house and a condo is simply worlds apart!
In fact, I didn't make the most correct choice either. 10 years ago, I was still too cautious. Not only 10 years ago, but even when I bought a house 4 years ago, I was too conservative. Of course, I think the price of the house I bought 4 years ago is almost back to the price of 4 years ago. But why do I say I was still too cautious at the time? Because 4 years ago, the price difference between big houses and small houses was not very big, and we could buy completely different houses with a little more money. At that time, I was not bold enough! If I had bought a bigger house, it would definitely not have fallen back to the original price now.
So, in this situation now, should we desperately pull the leverage to the highest level and borrow as much as possible to buy a house? Every era has different situations, and it is difficult to generalize. In the past, I felt that buying a house was difficult, and I was worried about the risk of losing my job. Now I have even more such worries because the economic situation is unstable.
What decision is right now? No one knows. But my personal character is more cautious. Since I have been so conservative in the past and missed previous opportunities, there is no need to rush now that housing prices have risen so high. Housing prices have risen to this level, what kind of room for growth can we expect? Therefore, there is no need to desperately buy a house. On the contrary, I think buying a house now may not be a good investment, and may even lose money.
Of course, I have always wanted to buy a condo near my home, mainly because I can go to the condo's swimming pool at any time, which is very attractive to me. It always feels a little inconvenient to go to the community swimming pool, and I have to arrange time in advance and run to the community. If I buy a condo myself, I can go swimming whenever I want. Mainly, my children like to swim, and I accompany them.
The main reason for the current housing prices is that the income of local people is not good, and everyone's life is difficult, so naturally they can't afford a house. But how should I put it, there are different groups of people who have difficult lives. In the Chinese community, many families are doing well. For example, my children's classmates, I feel that their lives are very good. Tomorrow, the children are going to play at their classmates' house, and they told me that their classmates have many houses, and the houses are very big.
So, this is a different world in the same city, and everyone's situation is very different. On the one hand, it is related to income. High income naturally makes it easier to afford. For example, as I just said, an annual income of CAD 200,000 is needed to afford the average house price, but if the family annual income is CAD 500,000 or CAD 1 million, then life is certainly not so difficult.
On the other hand, it is the dividend of the times. If you bought multiple houses 20 years ago instead of thinking about buying a house now, such families would live very easily in Canada.
But for new immigrants now, the situation is very difficult. Without capital accumulation, it is very difficult to work hard here again and create a new life like the Canadian dream or the American dream. It is very difficult to start from scratch without original accumulation. Of course, not only Canada, but also the United States and China are the same now, because housing prices are very high now. But China may be better in comparison, because wages in China have also risen. I feel that wages in Canada have not risen much over the years.
Of course, wages have not risen much in the country as a whole, but it is not the same for each individual. For example, I know many people whose wages have actually risen a lot. Some people's wages may have increased by more than ten times in the past decade. But I also know some people whose wages have not risen much. For example, some people I know, their wages may have only doubled in the past decade, and a double increase is considered very good. I also know some people whose wages have only increased by 10% or 20%. Some even just take the minimum wage, but the increase in the minimum wage is actually relatively large. The minimum wage has actually increased by 70% in the past decade, from CAD 10 to CAD 17. But the wages of many people, according to statistics, have not risen much.
So, if you attract a lot of immigrants to Canada and suppress Canadian wages, it will lead to Canadian wages not being able to rise. So in the end, it is still a matter of income and expenditure. If your income is not enough to afford living in Canada, then of course life is very difficult. But if your income can not only afford life, but also have a little more money each month, then life will become very good.
This is the story of "The Little Horse Crosses the River". If you are more capable than others, life will be very good.
In short, I hope everyone's life will get better and better!