South forest hill residences.Canada’s biggest bubble burst? Canada’s biggest bubble may have burst, with new figures from Statistics Canada showing that house prices in Toronto fell at their fastest pace in more than 20 years in October.Please Visit: South forest hill residences to Get Your VVIP Registration Today!
The price index of new homes in Toronto fell 1.4% in October from a year earlier, the biggest drop since September 1996, according to Statistics Canada.
Across Canada, house prices rose 0.1% in October, the slowest increase since 2010, indicating that the Canadian real estate market has stalled.
From October 2017 to October 2018, the rate of new housing construction in the Greater Toronto area dropped sharply by 40.3%.
Bloomberg analysis said it was the Canadian government’s measures that led to the emergence of an inflection point in the real estate market. The Canadian government introduced a series of policies in 2017 to help cool the overheated real estate market, including tightening mortgage laws.
Between July 2017 and October this year, the Bank of Canada raised interest rates five times. This further squeezes the real estate market.
Last week, Canadian two-year and five-year bond yields were upside down for the first time since 2007. This usually indicates a lack of confidence among investors in continued economic growth.
This affects the profitability of banks because they pay short-term interest rates on deposits and charge long-term interest rates on loans. It also led banks to tighten lending further, getting borrowers into trouble at a time when the market needed liquidity most.
This slowdown in lending is evident in home sales. Data show that home sales in Toronto fell to a lower range of seasonal activity. At the same time, inventories have increased sharply, accounting for 2.6% of sales, and the market is expected to face more pressure in 2019.
Canada’s biggest bubble burst? House prices in Toronto fell the most in 22 years.
Canada’s real estate bubble has a long history, after UBS’s global real estate bubble index showed that Toronto and Vancouver ranked third and fourth respectively in the world’s major developed countries and regional urban real estate bubbles. Hong Kong is firmly at the top of the list, while major US cities are lower.