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THE NEW NORMAL?
Dream House For Sale

Some say Canadians have their collective heads in the sand, thinking our double-digit gains in the housing market will continue indefinitely. But there's plenty to consider:

  • The economy is still sluggish, weakened by the drop in oil prices.
  • Low interest rates have enticed Canadians to take on large amounts of debt, making them financially vulnerable when rates rise.
  • The ratio of debt to disposable income for the average household is 165%, far greater than it was in the U.S. at the top of their housing bubble.
  • Mortgage rates are at historic lows, yet young adults are unable to buy their first home.

We've been living in a bubble for years and the truth is, houses can't continue to increase double digits year after year. The lack of affordable single-family housing in cities like Toronto and Vancouver is a real problem.

Financial institutions are contributing to the issue while government policies are enabling this behavior. Restrictions and regulations placed on builders by municipalities and provinces have limited supply and driven up housing costs.

Steps are being taken to control household debt in preparation for the inevitable rise in interest rates, but for the over-leveraged and underprepared, the effects could be devastating.

Let's hope the economy goes sideways so we can avoid the dreaded national margin call.

Karam Lal signature
Karam Lal -
Canada Branch Manager

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08/21/2017 04:34:16 PM; CNWEB4 -0-0/0.0-1