Once upon a time, Canada was the place to be, a dream come true. But you know how dreams sometimes sour? Well, that’s what’s happened with Canada.
Welcome to a country where every corner seems to have a problem: legal drugs, crime-ridden streets, and the worst part – the crazy high prices for everyday stuff.
But there’s one big problem that everyone’s worried sick about – the Housing Crisis. People in Canada can’t buy homes without breaking the bank. Either homes aren’t available, or if they are, they cost a fortune – like four times what most people make in a year!
The Jaw-dropping House Prices
Let’s talk about prices in some of the big Canadian cities:
In Toronto, standalone homes now cost a staggering $3,111,667 or $3.1m. That’s more than 11% higher than last year. And in fancy areas like Rosedale and Moore Park, the prices shot up 4.3% to hit a jaw-dropping $4.3 mn.
Vancouver isn’t much different. Standalone homes there will set you back a cool $1m, which is a 2% jump from last year.
Even in Ontario, where things were supposed to be a bit more down-to-earth, the price tags climbed by a whopping 16%, landing at a still-steep $479K.
So, what’s the big deal? Well, the big deal is that regular Canadians are finding it harder and harder to afford a place to live. And who’s Canada’s government blaming? Immigrants. They say newcomers are buying up homes like crazy, leaving average folks with nowhere to go.
Okay, that’s partly true. But there’s a way bigger problem that could wreck Canada. It’s called the Housing Bubble.
Right now, the Canadian housing market is like a roller coaster that’s only going up. Prices are going through the roof – like, 33% higher in just a year! Which is way more than other places around the world, where prices are just going up a little.
The 150% Debt
Canadians are taking out money from banks but aren’t paying upfront. They’re taking out loans, also known as mortgages. And, the total mortgage debt in Canada is a mind-boggling $2.2 trillion, even though the entire country’s money-making, the GDP, is only $1.6 trillion!
When the mortgage debt is 150% of the GDP, that’s not a sign of everything being great. It’s like a warning bell ringing that something really bad might be about to happen.
Experts are ringing that warning bell too. According to experts, Canada’s housing bubble could burst at any moment. One expert even says Canada’s housing market is like a time bomb, just waiting to go off.
Believe it or not, Canadians are in trouble because they’ve borrowed so much money compared to what they make. If interest rates go up (and they probably will), a large populace could be in big trouble. Imagine having to pay way more for your mortgage every month – that’s not fun.
And one expert, Phillip Colmar stresses Canada might be in the biggest housing bubble ever!
Colmer says the super-high home prices in Canada are happening because the country’s central bank made it super-easy to borrow money for almost 20 years.
And now, if interest rates go up and lots of people can’t pay their loans, that’s when a bubble bursts. And when it bursts, it’s like a big bubble popping – loud and messy.
Understanding Housing Bubble
Now, you might be wondering, what’s a housing bubble? It’s almost like a balloon that gets too big and suddenly goes “Pop!” In the housing market, it’s when house prices shoot way up and then suddenly crash down. It’s bad news for everyone involved.
Canada’s in a situation a bit like what happened in the big financial mess of 2008. Back then, in the U.S., everyone was taking loans like there was no tomorrow. They borrowed a ton of money, and pretty soon, they couldn’t pay it back.
The situation led to a tipping point when insolvency papers were filed by Lehman Brothers causing fear in the market, which led to a withdrawal of funds by everyone. As a result, the market experienced a bloodbath as many well-known lenders like Citi Bank and Washington Mutual went bankrupt.
Additionally, because the world depended on the US for many essential economic activities, it had an impact on the entire global economy.
Canada’s Impeding Economic Crisis
In Canada, it’s kind of similar. People, even from other countries predominantly China, are investing a lot in Canadian homes, especially in cities like Vancouver and Ontario.
It might just be a matter of time before a big Canadian bank goes under. When that happens, it could set off a chain reaction – like knocking over one domino after another.
People will get scared and start pulling out their money from all over. Chaos will reign, and the housing market will go from being crazy expensive to pretty normal – but that’s when a lot of people might be left without a place to live.
As the housing bubble bursts, home values could drop like a rock. That means lots of homeowners might owe more on their mortgages than their homes are worth. People could lose their homes, leading to even more problems.
Job losses might pile up as people can’t afford their mortgages or rent anymore. That means even more instability and people being homeless.
This could trigger a whole chain of events that could wreck Canada’s economy and lead to a lot of uncertainty.
Right now, Canada’s flying high on its housing bubble. But once that bubble pops, Canada’s story could take a dark turn. Sadly, this time the world won’t feel it as much. Canada might be the one left picking up the pieces. The Canadian dream will soon come to an end, the writing is pretty clear on the wall.