Union City Condos price list . The multi-land housing market has overheated and threatened economic development. As house prices soar, the Bank of Canada warned in recent days that excessive household debt ratios and imbalances in the housing market are growing, which experts worry will make the national economy more vulnerable.
In its annual review of the financial system, the Bank of Canada said that many Canadian households take on a large amount of loans compared to the income they earn, which limits their flexibility to cope with unexpected financial shocks.
In the event of accidents such as losing their jobs, they will not be able to afford heavy loans.
Although Canada’s consumer debt (credit card debt, student loans, consumer loans, etc.) has declined since the beginning of 2020, mortgage debt on homes has increased sharply, directly offsetting the decline in consumer debt.
The central bank pointed out that total household debt has increased by 4% since the beginning of the epidemic, and since the middle of last year, household debt has rebounded sharply as the housing market began to heat up, a large part of which is home loans.
One of the reasons for the rise in home loans is soaring house prices.
House prices across the country have risen 23% compared with a year ago, the central bank said in a report. Meanwhile, the Canadian Real Estate Association (CREA) said this week that the average price of homes sold in Canada reached C $696000 in April.
Compared with the rise in house prices five years ago, which was mainly concentrated in Toronto and Greater Windsor, the central bank said the recent surge in house prices was widespread and common in all cities.
In the view of the central bank, markets in the Greater Toronto region, Hamilton and Montreal are already overheated, while Ottawa is on the brink of overheating.
Another reason for the rise in housing loans is that as house prices rise, the supply of houses sold on the market lags behind demand. Some homeowners are worried that if it goes on like this, they will not be able to afford to buy a house in the future, so they might as well grit their teeth and buy it now.
The central bank also warned that some families are not greedy enough to swallow elephants when applying for new home loans, making them more vulnerable to rising interest rates when renewing their loans.
Although the Canadian government’s assistance and the central bank’s efforts to push down interest rates helped households and businesses maintain their financial bottom line during the outbreak, and not only that, many people are now much better off than expected during the recession.
However, the central bank said in the report that this boom may help the economy rebound in the short term, but if the economy slows again, then these households will have to cut spending, which is likely to lead to future bankruptcy.