Despite the fact that interest rates have risen over the past year and the housing market flatlining in Toronto and other Canadian cities, for whatever reason， people are still selling houses at ridiculous prices (from listings I see online in my area).
For example, a family acquaintance sold a condo for $535 000 with the closing date being December 19 (10 days ago as of this post). The only problem, however, is that said condo has a monthly fee of $680 and property tax of $2500/year. On this market, it can be rented out for no more than $1 900/month. If you do the math,
(1900 x 12 - 2500 - 680 x 12) / 535 000 x 100% = 2.26%.
There are many, many condos like this, and the math is even more brutal when it comes to semi-detached houses and single family homes, sometimes going down to below 2%. On the other hand, a 1 year GIC has a yield of 3% these days and if only you can break the $535 000 cash into 6 deposits such that if every single bank goes bankrupt, CDIC would still reimburse you for the principal and interest.
So, going back to this point: why should anyone buy a house to live in if they are renting right now, given that you can put hundreds of thousands into a GIC and use the interest to pay your rent?