Psychology is a driving force of any housing market. It can influence bidding wars or convince sellers to only accept offers well over asking. Many even believe that psychology is responsible for people staying in the rental market despite having the means to buy a property. Whatever role it plays, psychology is a pervasive force whose role is often forgotten.
Let’s take a more in-depth look at how psychology drives the Greater Toronto Area housing market.
Ontario’s Fair Housing Strategy
The Provincial Government implemented the Fair Housing strategy to tackle housing affordability, including a 15% tax on foreign buyers. Many believe that the presence of this strategy, not the actual policy changes, led to a market dip in the later part of 2017 and early 2018.
This slowdown was caused in part by new homeowners experiencing stricter legislature for the first time. Additionally, these policies will most likely have positive long-term effects but their presence can shift current behaviours.
Outside of a few instances in Canadian history, markets rarely crash. The belief that a market is going to crash is largely influenced by psychology, or more specifically, fear of impending doom.
Markets have tendencies. They dip and rise and most often do the same thing at the same time every year or because of the same factors. Unfortunately, it is common for buyers and sellers to take a small amount of knowledge and create a “sky is falling” scenario.
Psychology can be boiled down to risk tolerance and that will determine how you view the housing market.
Fear of buying a property in the GTA is exacerbated by social and traditional media. It only takes one story about a crazy bidding war or a house being on the market for too long to make people think a certain thing.
We’re all scared of losing money on an investment or losing our home because of a rate hike. A fragile psychology is something you will need to overcome so you can invest in an asset that can set you up for a healthy and stable retirement.
The housing market will always be volatile but it will continue to yield returns for those who take the leap.
Looking to Buy?
Markets are gaining momentum making 2019 a great time to buy or move. Contact us to discuss your mortgage options and we can even provide insight into current trends.