Housing News

The looming Canadian real estate bubble

real estate bubble

The Canadian market is sending mixed signals of improving net worth, but as debt rises and home prices fall, some speculate Canada is on the verge of a massive bubble.

canadian real estate bubble

Mixed signals in the market

According to the Association for Canadian Studies, the median household income for Canadians is now $68,560 per year, with the average Canadian paying $11,000 annually in income taxes, donating $260 to charity, and contributing $2,790 to a Registered Retirement Savings Plan. Mortgage and household debt is at $112,329 with the average credit card balance carried hitting $3,462.

According to Statistics Canda, Canadians’ net worth is up to $193,500, having benefited from home prices doubling in the last ten years, but the market is now cooling and prices and sales are beginning to slip. While savings rates have fallen to 3.1 percent from double digits just 20 years ago, as personal debt to income has hit a historic high of 153 percent, making a dent in the net worth gains seen in recent years. As credit card debt continues rising, and savings are falling, real estate’s pending correction could see that high net worth take a dive in the next few years.

The pending bubble burst

New West reporter, Brian Pybus calls the state of real estate more than a correction, he calls a huge bubble. Pybus writes, “The continued policy of low interest rates is as harmful to the best financial interests of Canadian consumers as was the record high interest period of the early 1980s,” referring to the ugly side of the popular record-low interest rates, as consumers see low interest rates as “cheap money,” which has led Canadians down the primrose path of running up their debt and leading to a market influenced more heavily by speculators than families.

While there is not a consensus on what the bubble looks like, most speculate it is between 30 and 40 percent, which is less than favorable news not only for the average family whose net worth may have just peaked and are fooled by low interest rates into an unnecessary buying frenzy that looks to be ending in short order.

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