Recently the rising consumer debts are Canada was said to be alarming. One of the major reasons for this is that some housing markets are over priced. Toronto and Vancouver property market had the highest housing-price inflation recently. Investors are confident that the prices of the properties in these regions will keep on rising, so the consumers will have to take more debt. The homes in these regions are becoming unaffordable for renting or buying. According to The Economist, the housing prices in Canada are 34% overpriced against the mean disposable incomes.
Overpriced housing market
Consumer debt in Canada is 165% of the disposable income. Most of this money is used for buying houses. The house prices are overvalued. One reason for this is the low oil prices in Canada recently.The economy has become shaky and has led to inflated debt and increased housing prices.
The Canadians are already debt-strapped. Coping up with the increased mortgage payments has been tough on many people. Due to the low oil prices, there has been a downturn in the economy. So, consumer spending will be less. The working age population in Vancouver and Toronto is growing about 70% compared to the national average. These two cities are responsible for a major portion of the economic growth of the country. But the job in the whole nation was only 0.9% last year. Toronto had 5.5% new jobs and Vancouver 4.4%.
Former Vancouver realtor, Annette Denk , who moved her business to the Okanagan had this to say, “with prices extremely inflated in Vancouver I knew my bet would lie in the more affordable trending market in the OK.”
The exports in Canada are increasing. But there is still a risk of inflation. This will increase the interest rates and result in the correction of the housing prices.