A number of experts have been warning about a major housing bubble in Canada in 2017. You may be interested in what they have to say if you want to buy or sell your property in Canada online.
Hilliard MacBeth, is a leading expert on the Canadian housing market and author of the book ominously titled, Bubble Bursts: Surviving the Canadian Real Estate Crash. He believes that Canada is all set for a 40% to 50% fall in real estate prices.
Mr. MacBeth said in an interview with a Canadian newspaper, “Canada is unique in the world in the availability of government insurance through CMHC [Canada Mortgage and House Corp.], that’s allowed the lenders to lend a phenomenal amount of money. [Household] debt levels have gone from one trillion dollars to $1.8tn, just in 15 years.”
He added, “I think the government has genuinely tried to encourage the housing market and home ownership, which started after the Second World War. But in the last 15 years, it’s kind of taken on a life of its own. It’s this monster that nobody can really tame. The reality is, lenders don’t really take any risk, so they keep on providing more and more [loans].”
What Mr. Macbeth says has been corroborated by many other experts, including William K. Black, author of bestselling book on financial fraud, The Best Way To Rob A Bank Is To Own One. Mr. Black is well known in Canada for his role in exposing the Savings and Loan Crisis. He has hinted on many occasions that what’s happening in Canada right now is even worse than the situation that led to the subprime mortgage crisis in the United States in 2008.
Mr. Black said in a recent interview, “The housing bubble, a massive housing bubble, a housing bubble as a percentage of GDP that is considerably greater than the US housing bubble that preceded the financial crisis here in 2007, 2008 as well. Yes, you've been hearing about it because it has been continuous.”
“It began roughly the same time as the US massive housing expansion. It was pretty much at the same rate of expansion up to the crisis, but after the crisis, of course, and then shortly before the crisis, US housing prices began falling actually in late 2006. They did not, in Canada. They increased. There was a little bit of a stall in terms of the height of the great recession but not that much of one and in general acceleration of the growth that has continued to this day,” Mr. Black said.
The government of Canada knows that there is a risk of a housing bubble and that’s why they have been trying very hard to bring down the real estate prices. One of the things they have done is to impose a 15 percent tax on foreign investment in real estate in Canada.
This move follows the complaints made by many locals that there is no way for them to compete with rich investors from countries such as China for properties in Toronto and Vancouver. They say that the locals have been priced out of the market and cannot afford to buy property in Canada online.
But is that really true? Economist Paul Ashworth of research firm Capital Economics does not agree. He says, "The massive surge in risky debt being taken on by Canadian households illustrates that the housing bubble can't be blamed on cash purchases by foreign investors. House prices have been boosted by domestic credit growth, fuelled by relaxed lending standards."