Bubble trouble? Canada’s hot housing market raises concern
Economy more dependent on housing sector than most other nations
Canada’s sizzling housing market has again raised concern about a bubble in a country where mortgages make up one of the biggest consumer debt piles in the world.
Home sale prices ended 2020 at record highs and haven’t let up this year, according to Bloomberg. Year-over-year pricing is now up more than 30 percent in many markets across the country, according to the report.
Along with the rest of the world, Canada’s housing market slowed to a near-halt in the first months of the pandemic then came roaring back. But so did the home loan originations.
The Canadian financial system’s exposure to those loans is twice that of the U.S., with some economists warning its economy is too dependent on the housing sector.
“A much greater share of our economy is now devoted to residential construction as opposed to nonresidential structures, or just straight spending on machinery and equipment,” said Bank of Montreal economist Saul Gautieri. “That fundamentally is not healthy.”
Vancouver and Toronto are among the least affordable cities in the world. Price growth in smaller markets, too, means it’s becoming increasingly hard for lower- and middle-income Canadians to buy.
Lawmakers including Prime Minister Justin Trudeau have said they will consider new policies to help make homes more affordable.
[Bloomberg] — Dennis Lynch