Unclear why people think there is a bubble in Vancouver or GTA.
We have 11 or so factors converging, resulting in high demand and thus, high prices!
1) Interest rates are low low LOW .. and they will not go anywhere. They might head lower, like in Europe. A Canada 5 year bond is 1%, and a 10 year bond is a whooping 1.5%. Prime rate is at 0.5%.Yes, they may rise 50% .. to 1.5% and thus 5 year mortgages from 2.7 to 3.2% .. woohoo !
2) Baby boomers working longer, living longer and not moving in very large numbers to areas outside of MetroVan or GTA. Yes some folks move to the Okanagon, Sunshine Coast or Vancouver Island from Vancouver, or Barrie, Muskoka, PEI or Kingston, but it is not a very large percentage.
3) Baby boomers kids – the Gen Y folks now in their late 20’s and early 30’s – want to buy, and with mom’s and dad’s bank are flush with downpayment cash
4) Supply is non-existent except condos and far away tiny homes or townhouses. Almost no single family houses (SFHs) are developed anywhere in the MetroVan or Toronto area. Only further out, outside the greenbelt in GTA and Fraser Valley or Langely in MetroVan. A few hundred maybe. Condos remain affordable further out appeal to some but not to folks that wish to stay near the water or close to subways or downtown.
5) No more land is created due to pressure by radical environmentalists, green movement, sheer laziness and a political class unwilling to make a bold move to create more land, say in Boundary Bay, off Delta in the Fraser River delta, off UBC even or up the mountains, say Indian Arm. GTA does some Don Lands and water front redevelopment and that is a great area to buy I think as the prices are still much lower than downtown. Check out some links here
on the West Don Lands, very close to downtown Toronto
6) Property gains are untaxed if it is a personal residence, unlike any other investment that is taxed at at least capital gains rates (around 22-25% tax) or as investment income (close to 50% tax)
7) No inheritance tax in Canada, allowing cash to be gifted down the line
8) 1% or so immigration into Canada, many with cash, and the first thing folks want to acquire is a home. A higher concentration of immigrants arrive in MetroVan or GTA than say, Saskatoon, Calgary, Montreal or Yukon where housing is cheaper but climate is not as desirable.
9) foreign money is arriving in record numbers from unstable regions of the world with autocratic governments, corruption or mere undesirability.
10) even new condo supply is getting more expensive due to more and more rules, levies or surcharges heaped onto developers. Add land scarcity and condo prices will continue to climb, albeit not as much as SFH.
11) This is not restricted to GTA or Vancouver, we see high prices in many desirable cities with decent climates and jobs: Boston, New York, Munich, Vienna, Singapore, Sydney, Auckland, Berlin, Paris, London, etc .. and $800-1000/ sq ft is not all that high compared to these cities.
Yes, we may get a speculation tax to take away some element of popular gambling with housing, and yes we may get a surcharge tax on foreigners in GTA like in BC (a good idea in my opinion), but that still leaves 9 - 10 reasons why demand is high and prices will not drop.