A Conversation with Don Kottick, President and CEO of Sotheby’s International Realty Canada
As the housing market continues to evolve in Canada, experts are weighing in on what’s next for this critical sector. In a recent interview with Larysa Harapyn from the Financial Post, Don Kottick, president and CEO of Sotheby’s International Realty Canada, shared his insights on the state of the market.
The "Froth" is Coming Out
According to Kottick, the Canadian housing market has been experiencing a phenomenon often referred to as "froth." This term describes the excessive speculation and price escalation that can occur in a rapidly growing market. As Kottick explains:
"Froth is when prices get disconnected from reality. It’s like a bubble, but not necessarily a bubble. It’s more like a frenzy… When you have people buying houses just to flip them, or because they think the prices will keep going up, that’s froth."
Kottick emphasizes that this phenomenon is not unique to Canada and has been observed in other markets around the world.
The Impact of Froth
So what are the consequences of froth in the housing market? Kottick points out that excessive speculation can lead to:
- Overpriced properties: When buyers drive up prices in anticipation of future gains, they create an environment where prices become disconnected from their underlying value.
- Market volatility: Froth can make the market more susceptible to sudden changes, as it’s often fueled by emotions and speculation rather than fundamental factors like supply and demand.
- Increased risk for buyers and sellers: When prices are artificially inflated, buyers may find themselves in a situation where they’re overpaying for properties, while sellers may struggle to sell their homes at a reasonable price.
What’s Driving Froth in Canada?
Kottick highlights several factors contributing to the froth in Canada:
- Low interest rates: With interest rates at historically low levels, buying and flipping houses becomes more attractive, leading to increased speculation.
- Government policies: Policies like the first-time homebuyer incentives can fuel demand and drive up prices.
- Limited supply: The shortage of homes on the market contributes to the price escalation, as buyers are willing to pay more for a limited number of properties.
What’s Next for Canada’s Housing Market?
While Kottick acknowledges that the Canadian housing market has been experiencing froth, he emphasizes that this doesn’t necessarily mean prices will drop dramatically. Instead, he expects a correction:
"As we see the froth come out, I think what you’ll see is a stabilization of prices… People will stop buying houses just to flip them or speculate on them, and they’ll start looking for value."
To achieve this stabilization, Kottick advocates for increased supply, which can be addressed through government policies that encourage developers to build more homes.
Expert Insights
For those interested in the future of Canada’s housing market, Carolyn Rogers, Senior Deputy Governor at the Bank of Canada, shares her perspective:
"The key is not just about interest rates but also about the other factors that influence the housing market… Supply and demand are fundamental drivers of the housing market."
In a separate article, Gabriel Friedman highlights the strength of the cottage market after the pandemic frenzy:
"Cottage markets in Canada have been thriving over the past year, with many buyers seeking out vacation properties as a way to escape urban areas during the COVID-19 pandemic… Despite some moderation in recent months, demand for cottages remains strong."
Conclusion
The conversation between Don Kottick and Larysa Harapyn offers valuable insights into the state of Canada’s housing market. As experts continue to weigh in on this critical sector, it’s essential to stay informed about the factors driving the market and what’s next for prices.
Sources:
- Bank of Canada’s Carolyn Rogers says supply is the key to solving housing problem
- Cottage market still strong after pandemic frenzy
- Calgary home prices jump again in April, despite slowing sales
- Summer air travel bookings ‘incredibly strong’
Additional reading:
- Recommended from Editorial: Bank of Canada’s Carolyn Rogers says supply is the key to solving housing problem
- Cottage market still strong after pandemic frenzy
- Calgary home prices jump again in April, despite slowing sales
- Summer air travel bookings ‘incredibly strong’
By staying up-to-date with expert insights and market trends, you can make informed decisions about your own involvement in the Canadian housing market.
