Canadian Real Estate: Is the Bubble Ready to Burst?

by steve on August 5, 2013

Real estate bubble

Have the new Canadian lending rules cooled off the real estate market as intended? Or will things like the coming mortgage rate increases tip the scales for home owners in Nova Scotia and the rest of Canada?

A year ago the Canadian federal government, CHMC, and Bank of Canada imposed new rules on mortgage lending. At first it seemed like a cruel blow to would-be property owners trying to get into the real estate market. In actuality, the feds were trying to save us from ourselves–taking action to avert a housing market crash like we saw in the U.S. four years ago.

But as much as they tried to stem the tide and avoid a crash, some say the bubble is ready to burst any time now. They say the signs are there–like the increase in Canadian real estate listings and decrease in sales.

According to the Toronto Star, columnist Adam Peterson points out two big red flags:

  • Compared to household incomes, Canadian house prices are high. In fact, he argues they’re downright unaffordable. And this, of course, means any change in rate or income could have a drastic effect on home owners.
  • Because the Canadian economy is so closely tied to the housing market, any small shift in it could be “problematic”.

He also points out that Canada is fast approaching a 5 to 1 home-to-income ratio–where the U.S. was back in 2006. And to compound things, household debt in Canada has breached 150% of income and “continues in the wrong direction”.

So which is it? Has the Canadian real estate market cooled off? Or is the bubble going to burst any day now? Have a look at this insightful, sobering article.

Shopping for a house, condo, or property in Halifax, Nova Scotia? Steve Ritchie is a REALTOR® with Keller Williams Realty. He’ll help you search for Halifax real estate on the MLS ® and other star systems. Call Steve today at 902-440-0552!


Photo credit: Hamed Saber via flickr

{ 2 comments… read them below or add one }

iakovos June 22, 2014 at 3:35 am
steve November 21, 2014 at 2:55 pm

Thanks for the reply on that your article was very illuminating about bubbles!


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