Is Canada still in a housing bubble?
Wednesday Jan 08th, 2020Share
While there are claims that the Canadian housing market cooled last year, industry figures seem to point to the opposite.
Recent industry data showed that the average house price in Canada grew by 8.4% over the year to November. This is despite the 4.6% fall in the once red-hot market of Greater Vancouver.
The strong growth in annual dwelling values was due to the gains recorded in Greater Toronto and Nova Scotia, where prices jumped by 6.8% and 19%, respectively.
"There are claims that 2020 will be the year when Canada’s housing bubble will finally burst," market watcher Matt Smith said in a think piece in The Motley Fool.
Smith said that growing uncertainty of the outlook for the global economy and the fears of a recession fuel the assumptions of a burst, especially given the high levels of household debt in Canada.
"The fear is that an economic slump will cause rising unemployment and already stagnant wage growth to worsen, placing ever greater pressure on heavily indebted households," he said.
And as housing costs continue to skyrocket, particularly in Greater Toronto, sales will likely fall.
Smith said this series of events could trigger an uptick in mortgage defaults as financially stretched households struggle to meet their repayments.
"Higher mortgage defaults would lead to an increase in housing supply in an environment where sales are softening, placing greater pressure on prices," he said.
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