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Is Guelph in a Housing Bubble…no really?

A week doesn’t go by without a customer asking if we are in a housing bubble. While it may appear that we are in a bubble when you consider price increases, there are a number of factors that lead us to believe Guelph isn’t in a bubble.

Let’s consider the indicators:

  • The Sales to New Listings Ratio measures the amount of properties sold versus the number of new listings for a given month. The higher the ratio the more likely you are in a seller’s market. An extremely high number indicates a housing bubble. Guelph’s SNLR is well above 60%.
  • The Price Increase is a measure of how home prices from one month to the next, or from one year to the next. Guelph property prices increased approximately 5% last year, and some estimates show prices are trending about 7% above last year’s average prices. An increase of home prices between 10 to 20% year-over-year would indicate Guelph is in a housing bubble.
  • The amount of Multiple Offer Situations is on the rise in Guelph, with some estimating that as many as half of all home offers in recent months having been completed in competition. In addition, some home builders are experiencing line-ups for new releases.
  • Interest Rates remain low, and with all the economic drama in the world, it is unlikely that we will see any significant increases in rates for the next 18 months. Low rates have translated into greater buying power, which has helped fuel price increases.

Information to prove Guelph is not in a housing bubble:

  • Real Estate Inventories are at a low point. Recent published information shows that there is only one month of inventory available for buyers to choose from. Our buyers keep telling us that there “just isn’t anything out there,” but they’re still looking. It is no wonder there are multiple offers on resales and line-ups for new construction.
  • Guelph’s real estate prices have increased an average 6% (approx.) per year over the past 45 years, so it doesn’t concern us that we may have a year or two in a row when prices increase over that amount. That’s how averages work! Some years you have a lower number, and some years it is higher.
  • Average Incomes in Guelph are above the provincial average, and as a result we are seeing people buying more luxurious properties. It is no wonder values are creeping up, however they aren’t creeping up at a pace that is way out of line with average incomes for our area.
  • Mortgage Rules are significantly stricter today than just two years ago. The stricter rules are actually slowing down the pace in price appreciation.

Guelph has the good fortune of being a great place to live, work and play. It is a Places to Grow Act city and will hit a population of 175,000 in about 15 years. That’s an increase of about 3000 people per year for many years to come. About 70% of those people will live in a property that they (or their parents) own. We will need approximately 1000 new housing units (owned and rented) to accommodate the influx of people, which will only do great things for property values.

So with Places to Grow Act in mind, you have to ask yourself, are we really in a bubble? The reasons to believe we have a bubble are balanced off with the reasons we aren’t in one, especially given Guelph’s history of prices appreciating about 6% on average over the past 45 years.

If you are sitting on the fence about buying, consider the fact that Guelph consistently ranks as one of the top 10 cities to “invest” in real estate in Canada. (Source: Money Sense & REIN) When taking the plunge, just buy something that fits within your budget and allows you to enjoy life too. You’ll appreciate having spare room in your budget for the little curve balls that life throw your way, like needing to get a new car.

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