More supply needed to balance housing market
This also applies to our local market in the Georgian Triangle.
timescolonist.com – Sun Jul 10 2016In 1967, the Star Weekly reported on the phenomenal increase in housing prices with the headline: “The Housing Crisis Is Out Of Control.”Sound familiar?Three of the most influential factors affecting the real estate market are interest rates, global and local economics, and government regulations.
We now have the lowest interest rates in decades. This has allowed homebuyers to borrow more and, consequently, pay more for a home, adding greatly to inflation.
In 1981, interest rates skyrocketing to an unbelievable 20 per cent put the brakes on borrowing. Home sales stalled and by the end of the year, the market value of property in Victoria had dropped by 30 per cent. Recovery took years.
In 2008, the market was hit by the global recession, created primarily by the sub-prime mortgage debacle in the U.S. That brought a significant slowdown in real-estate sales, vacated development sites, partially finished buildings and for-sale signs showing drastic price reductions.
Government regulations significantly affect the supply of new homes necessary to satisfy demand. In our area, urban and sewage containment boundaries coupled with the Agricultural Land Reserve have limited the supply of developable land.
Further adding to costs are the layering on of multiple government taxes, development charges and slow municipal responses for rezoning applications.
It really doesn’t matter where the supply enters the market, so long as it adds to the housing stock. This allows for the movement of buyers from one level of housing to another, keeping a balance in the supply-and-demand equation that greatly influences the value of real estate.