The price growth in the real estate in Montreal has been relatively in line with the income s of the people as compared to the markets of Toronto and those in Vancouver that are often overexposed and also often overvalued. The risk of changes in housing prices is often valuated using the HPAA framework which helps in assessing the conditions of housing markets. The risk factors are often looked at so as to determine the housing prices conditions in various areas. One is the demand over heating risk. This is where the demand for housing outweighs the supply for houses significantly. The other risk is acceleration in the prices of houses. This behavior is often reflective of speculative behavior in the players in the housing market in the area. There is also a risk of overvaluation of the prices of the houses. This could also be a partial reflection of the speculative nature of the players in the market. There could also be an overbuilding in the market for housing. Such a risk would mean that the supply has responded too strongly or aggressively towards the demand for the houses. The risk factors mentioned above have affected Montreal Toronto and Vancouver differently.
In Toronto the overvaluation in the housing market’s pricing could be as a result of various factors such as the economic, financial and demographic factors surrounding the said area. The levels of these factors may be way below the estimates we would come up with based on the prices valued on their housing and the price growth in the area. The situation in Toronto may be caused by the fact that the real disposable income in the area has not been increasing at the same rate that the prices in houses has been increasing in the area over the years. The levels of income in the area have increased however over the years. Aside the population of new home buyers in the area has increased. New home buyers often range between the ages of twenty five to thirty five as most people at that age are looking to settle down or start families. The two factors, increased income levels and upscale of new home buyers, are two major developments that help in increasing the demand levels for housing in any particular center. The area has also seen improving demographic conditions as well as improving employment rates. The moderate risk in growth of price has also helped moderate the risk of overvaluing the housing market in the area. The overvaluing often comes in due to the high level of completed units that are unoccupied and unabsorbed as well as the rental vacancies that are below the rates that have been observed before. The area also has a lot of units that are being constructed which is relative to the population in the place.
Vancouver’s real estate and housing sector has often been stated as being overvalued severely. The valuations in the area look a bit stretched when examined next to the factors determining them and also when compared to other areas. The price to rent ratio is very high. This majorly indicates that the housing prices in Vancouver are dependent on the interest rates in Canada that are very low due to policies implemented by the Bank of Canada. The housing situation in Vancouver is also dependent on foreign demand causing the housing to be unaffordable for many locals as examined in local’s standards. In this situation, the houses are often seen to be out of reach for the middle class families. This has been blamed on the foreign ownership in the area that is mainly attributed to the high number of Chinese investors who eventually cause and drive the prices of the homes up. In 2006 the housing values in the area were already high. The prices have risen since then. The continued rise is fed by the increasing demand for the real estate in the city by the Asians. The foreign demand is thus unpredictable which clouds the situation in Vancouver.
Various reports on potential investments show that potential investors are no longer looking at Toronto and Vancouver but are starting to focus on Montreal. The areas in western Canada are suffering from falls in oil prices which eventually hurts the growth rate in the area. However, in contrast to the west, the east is experiencing a low loony that boosts the manufacturing in the area. The areas of Vancouver and Toronto have experienced high prices causing the investors to seek other affordable options such as Montreal. The urbanization trend in the two cities had been continuous for a number of years. However, since the housing prices in the areas have gone up, most new home owners often opt for cheaper options in properties that are now found in Montreal whose real estate is in line with incomes of the people. Other than that most people now view renting differently. Before it was considered as a stepping stone before buying a home, but is now considered as an alternative that is better and more affordable. This means that Montréal is seen as an option for people not looking for a permanent home but some place that they can be able to rent.
The housing markets in Toronto and Vancouver differ from Montreal as they offer housing properties at much higher prices. When compared to previous prices in the area, the current prices are seen to be stretched beyond what would be expected. Other than that, when the prices are examined in accordance to the factors influencing them they are also found to be overvalued. This situation makes Montreal a better option for investors as well as new home buyers. Other than this, others opt to rent out the property instead of permanently owning it. The number of permanent renters has risen over the years.