bravo festival condos in vaughan.The bubble in this country is infinite. In the latest economic outlook released by the Organization for Economic Cooperation and Development (OECD), it is optimistic about the global economy as a whole. Global economic growth is expected to accelerate from 2.9% this year to 3.3% in 2017 and 3.6% in 2018, but only the Canadian economy is worried.Please Visit: bravo festival condos in vaughan to Get Your VVIP Registration Today!
For Canada, despite the “moderately expansionary policy of the federal budget in 2016” and the Canadian economy showing good momentum, the OECD warned: “House prices, real estate investment and household debt are all very high. All risks affecting the country’s financial stability.”
The chart below shows the house price index of Vancouver and Toronto, which alone account for 1/3 of the Canadian real estate market, which is significantly different from the real estate index of the rest of Canada and has seen rapid growth in the past two years. But there is a hook at the top of the red line: a faint sign that Vancouver house prices may have an inflection point:
As a result, the group warned that Canada is undergoing a disorderly property market adjustment, especially for Toronto and Vancouver, where property prices are too high.
The group’s proposed “disorderly adjustment of the real estate market” in Canada will reduce real estate investment that plays an important role in the country’s economy. As a result, there is an opposite “wealth effect”, private consumption will be hit, and eventually banks will take great risks and even “may threaten financial stability”.
Interest rates are too low, stoking the already overheated real estate markets in Vancouver and Toronto, causing more and more Canadian households to take on too much debt that may be beyond their ability to repay. Both of these effects greatly affect the stability of the financial system.
Also because of low interest rates, the debt-to-disposable income ratio of Canadian households “continues to rise from already high levels”:
There is no harm without comparison. Among the many members of the OECD, only six countries have higher debt-to-disposable income ratios than Canada: Ireland, Sweden, Australia, Norway, the Netherlands and Denmark (the last two countries have a ratio of more than 250%). But others have implemented large-scale government subsidies and intend to incite the real estate bubble. The American debt target we always criticize is only 100%, which is even lower than Canada’s debt level in 2000!
“low lending rates have led to a surge in household credit and asset prices, especially for real estate,” the report said. ”
In terms of “financial stability” mentioned in the report, the report fully takes into account the proportion of bank size to GDP, non-bank size to GDP, housing loans to total bank loans, and current assets to short-term liabilities.
In a separate report, Peter Jarrett, head of the country Research Division of the OECD Department of Economics, made a special note on Canada’s real estate bubble, household debt and systemic risk:
The Canadian real estate market behaves very differently across the country. In most smaller cities, real estate prices are fairly stable and in line with fundamentals (income and rents), but the big cities are different. The census of 15 large cities monitored by the Canadian Mortgage and Housing Corporation (CMHC) shows that 10 cities show signs of high prices and 7 cities have overdeveloped real estate.
Excessive development and construction of real estate leads to surplus. So in particular, the group warned of the country’s “disorderly” real estate market adjustment policy.
Toronto and Vancouver account for 1/3 of the Canadian real estate market, while household debt is high (167.6% of national disposable income at the end of 2015, close to the OECD ceiling), indicating the country’s financial fragility. The impact of a sharp rise in unemployment has led to a sharp fall in house prices, which will weaken households’ ability to repay debt and lead to higher mortgage default rates, which could endanger financial stability. Another factor driving the overheating of real estate markets in Vancouver and Toronto is heavy purchases by foreign buyers. However, these purchase data are currently limited and the Federal Government of Canada has begun to collect them for funding from Statistics Canada.
