Will The Housing Market Crash in London Ontario?
Will the housing market crash in London Ontario? Is there a real estate bubble
in London Ontario? For the last few months, economists, the heads of
three of Canada’s major banks (BMO, CIBC & RBC) agreed that the
market is reaching its peak and though they do not foresee a crash, they
feel that prices are likely to decrease this year and perhaps decrease
for 2-3 years. (Some predict 25% across Canada)
Some are even predicting gloomier thoughts, such as a real estate bubble
ready to burst. That may be so for cities like Toronto, Montreal,
Calgary or Vancouver where new home and condo construction is at an all
time high.
I don’t think we will see this decrease in prices in London Ontario for the following reasons:
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The average selling price for a home in Canada at December 31, 2011 was $347, 801 while in London the average price
was $244,430 which shows that London has not seen the influx of
investors, speculators or the herd mentality which believe if prices are
rising, that they should jump in and buy a home so that they do not
miss out and benefit from those soaring prices. So as a result, housing
is perceived as an asset that can only rise in value and the herd just
keeps on going in debt and piles it on.
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It is believed that median house prices should be no more than three
times larger than the median household income. Today, prices stand at
4.6 times the median income across the major cities in Canada yet London is a little under that 3 times the median income level!
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Interest rates are at their all time low which usually means a real
boom for home buyers but with debt ratios for the average Canadian
rising, inflation being curbed to a minimum and tighter lending rules,
London historically has stayed the course with real estate prices being
less than the Canadian median.
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I am seeing more and more Baby Boomers moving to London because of
lower housing costs, London’s great medical facilities, the resurgence
of downtown London, the multitude of recreational facilities, golf
courses and situated between two of the Great Lakes, Lake Huron and Lake
Erie. These folks have cash or little debt, are leaving the larger
centres and are cashing out on the rising prices in their communities.
Is London Ontario immune to the rest of Canada? Of course not but the
influx of middle class newcomers to London with money will keep our real estate market stable for years. By no means should we ignore the global economy either but as demographics change, a house or a condo changes from bricks and mortar to a home.