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Canadian Housing Market, Bubble or Not?

Source: The Economist

What $1 Million Will Get You in Canada

What $1 Million Will Get You in Canada

Canadian Housing Market, Bubble or Not?

For Canadians, a topic of conversation that comes up often is the housing market. More specifically, whether or not Canada is in a bubble – and if so, will it burst?

It is no secret that Canada has some of the highest real estate prices in the world. Real estate prices were not even slightly slowed by the late 2000s global recession; in fact, they kept climbing higher and higher. All while Canada’s neighbour to the south experienced a dramatic drop and has only now recovered. Even more interesting, America’s average household debt fell after the recession, but Canada’s continues to rise. This is a very concerning thought.

Some attribute this to Canada having stronger fiscal health, a more stable banking system and the fruitful natural resources industry. Others say that Canada is set to experience a massive cooling down phase, one that would bring a drastic decline in housing prices.

Let’s narrow in on Canada’s West Coast oasis, Vancouver. Vancouver has a reputation for being one of the most expensive cities in the world in regards to housing prices and overall cost of living. In fact, when compared to other Canadian cities’ real estate, in some cases, Vancouver is more than double in cost per square foot. A million dollars will get you a cozy 1,500 square foot condo in Vancity. But the same million will get you 1,600 square feet in Toronto, 2,700 square feet in Montreal, and almost 3,800 square feet in Quebec City,

Outspoken economist, Doug Casey, seems to agree with the sentiment of Canada being overpriced, “ It’s a good time to leave Canada, since its property is quite overpriced by almost any standard – especially in Vancouver, BC.” Mr. Casey believes that Canada will suffer a similar fate as America, since Canadian banks are behaving in similar, generous fashion as their American counterparts did in the early 2000s. He also has dubbed Canada as “USA-lite.”

Will the old saying, “what goes up, must come down,” apply to Canada’s housing market or is this just the new reality of the Great White North?

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  • http://Allberta.com/ Allberta.com

    As the quality jobs diminish, the prices will start to go down.
    Though packing renters into every room seems likely.
    Just like here in Alberta.

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  • Rusty Brown in Canada

    One big difference here in Canada: when the big banks issue a mortgage, they are stuck with it until it is paid off. Can’t sell it to anyone else, no matter. Therefore they are very careful about the quality of the paper they issue and careful to qualify each mortgagor.

    Also, much of the high-end condo market is being bought by overseas buyers with cash to invest, so leverage in those cases is less, or even non-existent.

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