Is London Ontario Facing a Real Estate Bubble?

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:

• 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.
• 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!
• 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.
• 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.