Is Canada’s housing bubble finally popping?
Posted July 27, 2022 8:12 am.
In today’s Big Story podcast, house sales are falling, prices are dropping, and some investors are hurrying to get out.
At the centre of the soon-to-burst housing bubble (for real this time), is the Bank of Canada’s hiking interest rate, currently sitting at 2.5 per cent. What we do know, is that it will take the next few months for the country’s housing market to either cool or crash.
What will that waiting mean for home owners? Landlords? For aspiring buyers? For those stuck in a tough rental market? For people using homes as investment properties?
Today’s guest is Ari Altstedter, a reporter with Bloomberg News. Altstedter reports that as the Bank of Canada’s policy rate climbs, Canadian home prices decline, forcing many investors to sell properties they purchased as investments. In other words, if the central bank’s policy rate continues to hike, rent payments may no longer cover interest payments on mortgages, and more and more investors will scramble to force-sell.
“Price gains have come with a certain explosion of debt. They’ve been fuelled by more and more Canadians taking on debt, mortgage debt, to fuel, to buy houses and fuel those price gains,” he said.
“That led a lot of people to think, ‘well hey, this has some of the hallmarks of what got the U.S. into trouble prior to 2008.’ So maybe the same thing is going on in Canada. But on the other side that debate though, is that Canada unlike the U.S. we have very high levels of population growth due to our high levels of immigration. And so that creates a real demand for housing.”
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