8 Elm on Yonge Condos.Is the Canadian property market bubble close to bursting to zero? The Organization for Economic Cooperation and Development (OECD) is still optimistic about the development of the Canadian economy as a whole, and has specifically expressed its new enthusiasm for the global economy.Please Visit: 8 Elm on Yonge Condos to Get Your VVIP Registration Today!
For Canada, despite its “moderately expansionary monetary policy stance in the 2016 federal budget”, the country’s economic growth has performed well. But the OECD has issued a stern warning: “High property prices, real estate investment and household debt pose risks to the stability of the financial system [in Canada].”
The chart provided by the Economic Cooperation Organization shows the real estate price index in Vancouver and Toronto. Compared with other parts of Canada, the two major cities account for 1/3 of Canada’s national real estate market index. Pay attention to the hook at the top of the red line: there is a faint sign that real estate prices in Vancouver may turn downwards.
The APEC report also warned that “there will be risks to the disorderly adjustment of the Canadian real estate market, especially in Toronto and Vancouver, where house prices remain high”. And when will this risk come? Last month, some industry insiders pointed out that there is now a price divergence and volatility in the Vancouver and Toronto real estate markets.
As the OECD points out, a “disorderly adjustment of the real estate market” requires a reduction in real estate investment, which has become a key to the steady development of the Canadian economy. At the same time, if we reduce real estate investment and reverse the “wealth effect”, personal consumption will suffer, and banks will eventually experience risks, which will also “threaten the stability of the financial system”.
At present, interest rates in Canada have fallen to very low levels. For the overheated real estate markets in Vancouver and Toronto, this low interest rate policy is simply adding fuel to the fire and encouraging Canadian households to take on more debt. But the repayment of these debts could be a problem. Both of these effects exacerbate the instability of the Canadian financial system. When Canadian households’ disposable income is used to measure their debt, they continue to be “on the edge of already high levels” and encourage and support low interest rates.
Among the OECD member countries, only six countries have high personal debt-to-disposable income ratios: Ireland, Sweden, Australia, Norway, the Netherlands and Denmark (the last two countries have a ratio of more than 250 per cent). These countries all have a majestic “government support force” and support for the real estate bubble. For the “slaves” of American debt, their personal debt-to-disposable income ratio is just over 100%, well below Canada’s level in 2000!
