Bloomberg Nanos: Share of Canadians Expecting Home Prices to Rise Higher Than Ever
Consumer confidence has soared to a 12-month high, as an increasing number of Canadians anticipate economic conditions to improve amid the ongoing vaccine rollout. However, the continued economic optimism has also spurred real estate expectations, which suggest that Canada’s hot housing bubble is expanding.
The latest Bloomberg Nanos Canadian Confidence Index reading soared to 63.05 during the week ending on March 19, marking the highest print in 12 months. More alarming, however, is the share of consumers expecting home prices to continue soaring to new highs, which has topped 60% for the first time since polling began in 2008. According to the survey, six in 10 respondents believe the value of real estate property in their neighbourhood will increase within the next months, suggesting the ongoing price rally is beginning to fuel expectations of future returns.
The reading gives rise to further concerns regarding Canada’s housing market, which, according to analysts, has already entered bubble territory. Expectations that home prices will continue increasing into the future gives wind to speculative demand, where investors and potential homebuyers rush into the market over fears that they may miss out— thus hyper-inflating the already-inflated market even further. This will cause some potential home buyers to be priced out of the market, as well as further add to mortgage debt levels— which have been rising across the country.
The Bank of Canada has already begun to sound the alarm over a potential housing bubble. Back in February, Governor Tiff Macklem cautioned that signs of “excess exuberance” are beginning to emerge. Home flippers, which purchase property under the assumption they will resell it and make a profit, have become more prominent amid the pandemic. Moreover, moderately-sized homes are being sold for significantly higher prices, as potential homebuyers get into bidding wars amid ongoing housing supply shortages.
Information for this briefing was found via Bloomberg Nanos Research. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.